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Advanced Micro Devices, Inc. (AMD) Calls Active Amid Unexpected Rise

Advanced Micro Devices, Inc. is up nearly 7% on no apparent news

by 3/7/2014 1:22 PM
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Option Brief: Advanced Micro Devices, Inc. (NYSE:AMD) has jumped 6.6% to $3.98 today on no apparent news, bringing the stock back above its year-to-date breakeven mark (and perhaps prompting some uncertainty in the heart of Monday's option bear). Calls have easily emerged as the contracts of choice, trading at seven times the average intraday pace, and outpacing puts by a 10-to-1 margin.

The most active strike is the July 4.50 call, where 8,958 contracts -- including two large sweeps totaling 8,698 -- have changed hands. Nearly all of these contracts have crossed at the ask price and implied volatility has ticked higher, pointing to buy-to-open activity. Delta for the out-of-the-money (OOTM) call is docked at 0.41, suggesting a 41% chance of an in-the-money finish at July options expiration. Should the stock fail to topple the $4.50 mark over the next several months -- a move that would require an additional 13% rise from current levels -- the most the traders stand to lose is the initial cash outlay.

Today's positive price action highlights Advanced Micro Devices, Inc.'s (NYSE:AMD) longer-term prowess, with the shares sporting a roughly 56% year-over-year advance. In spite of this, short interest accounts for nearly a quarter of AMD's available float, suggesting that a portion of today's call buying at the OOTM strike could be a result of shorts hedging against any additional upside.


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