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Advanced Micro Devices, Inc. (AMD) Traders Eye a Weekly Retreat

Advanced Micro Devices, Inc.'s weekly 7/11 4-strike put is in focus today

by 7/10/2014 10:46 AM
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Option bears have set their sights on Advanced Micro Devices, Inc. (NYSE:AMD) in recent weeks, perhaps hoping to capitalize on the stock's historical July weakness. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.89 ranks near the skeptically skewed top of its annual range.

This trend is being witnessed today, with puts trading at nearly three times the intraday average -- and outstripping calls by a roughly 7-to-1 margin. The most active AMD strike by far is the weekly 7/11 4-strike put, where 92% of the 8,791 contracts traded did so at the ask price, hinting at buyer-driven activity. What's more, implied volatility has shot 27.3 percentage points higher, and volume exceeds the 3,199 contracts that currently make up open interest here. Summing it all up, it seems safe to assume new bearish positions are being purchased.

The volume-weighted average price (VWAP) for these out-of-the-money puts is $0.03, making breakeven at this Friday's close -- when the weekly series expires -- $3.97 (strike less VWAP). Gains will accrue on a move down to zero, while losses are capped at 100% of the premium paid, should AMD finish the week north of $4. In today's trading, Advanced Micro Devices, Inc. (NYSE:AMD) fell to an intraday low of $4.14 right out of the gate, but was last seen 1.3% higher at $4.28.


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