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Since taking a post-earnings plunge earlier this month, Advanced Micro Devices, Inc. (NYSE:AMD) has been wallowing beneath its 320-day moving average (currently located at $3.84) and the $4 mark -- both previous levels of support that may now be switching roles to serve as resistance. At least, this is what one group of option bears on Wednesday is banking on.
Specifically, the stock's January 2015 4-strike put saw the most action in AMD's options pits yesterday, with 12,486 contracts on the tape at the close. Almost all of these went off at the ask price, implied volatility edged higher, and open interest rose the most of any strike overnight -- collectively pointing to buy-to-open activity. Data from the International Securities Exchange (ISE) confirms this theory.
With AMD last seen at $3.82, these puts are in the money. However, in order for the put buyers to profit, the stock must be sitting south of breakeven at $3.39 (strike less the volume-weighted average price of $0.61) at the close on Friday, Jan. 16, 2015, which is when the options expire. Gains will accrue on a move down to zero, while losses are limited to 100% of the premium paid, should Advanced Micro Devices, Inc. (NYSE:AMD) settle north of the strike at expiration.