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Advanced Micro Devices, Inc. (NYSE:AMD) is following the tech sector lower, down 5.1% at $3.70. Nevertheless, option traders are gambling on a short-term rebound for the stock, as evidenced by today's healthier-than-usual appetite for AMD calls.
So far today, AMD has seen roughly 27,000 calls cross the tape -- a 61% mark-up to its average intraday call volume. Most popular once again is the August 4 call, where more than 6,800 contracts have changed hands at a volume-weighted average price (VWAP) of $0.14. Most of the calls crossed on the ask side, and implied volatility was last seen 4.9 percentage points higher, hinting at buy-to-open activity.
To make money on the call purchases, the buyers need AMD to surmount $4.14 (strike price plus VWAP) within the next few weeks, representing expected upside of 11.9% to the stock's current price. Should the equity remain south of the strike through options expiration on Friday, Aug. 16, the most the buyers are risking is the initial premium paid for the calls.
At present, the stock's 30-day, at-the-money implied volatility is up 2.2% since yesterday, and now stands at 55.6%. Since skyrocketing to an annual peak of 86% on July 11, however, the security's Schaeffer's Volatility Index (SVI) has descended to 54% -- above 29% of all other readings of the past year. In other words, AMD's short-term options are becoming less expensive, relatively speaking.
Technically speaking, Advanced Micro Devices, Inc. (NYSE:AMD) has outperformed the broader S&P 500 Index (SPX) by nearly 38 percentage points during the past three months, and last week tagged a fresh annual high of $4.65 on the heels of a solid earnings report. Since then, the shares have taken a turn for the worse, and are in danger of ending a second straight week beneath their 10-week moving average for the first time since mid-April.