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Advanced Micro Devices, Inc. (NYSE:AMD) options are flying off the shelves at three times the normal rate, with one speculator gambling on an extended bout of stagnation for the shares. Digging deeper, it appears the trader sold puts and calls at the June 4 strike, exploiting relatively pricey option premiums to bet against a major price swing.
All in all, Advanced Micro Devices has seen roughly 37,000 calls and 31,000 puts change hands, compared to its average intraday volume of around 15,000 calls and 7,200 puts. Nearly all of the action has transpired at the aforementioned June 4 strike, which saw symmetrical blocks totaling 30,000 contracts cross the tape on both sides. More specifically, it looks like the calls were sold to open for $0.31 each, while the puts were sold to open for $0.39 apiece, suggesting a short straddle was initiated for a net credit of $0.70 per pair of options.
As alluded to earlier, the goal of the strategy is for AMD to finish at $4 when June-dated options expire at the end of next week. In this best-case scenario, the options will expire worthless, allowing the trader to retain the entire net credit -- which is a relatively pretty penny, judging by the Schaeffer's Volatility Index (SVI) of 71%. In fact, the SVI sits just 18 percentage points from a 52-week acme, implying that AMD's near-term options are pricier than usual -- a boon for option sellers.
It's worth noting that AMD has remained pinned between support near $3.80 and resistance near $4.20 for nearly a month now. However, should AMD sink beneath the $3.30 level (strike minus net credit), or rally north of $4.70 (strike plus net credit), the investor's losses will begin to accumulate. At last check, AMD was flirting with $3.95, up 1.3%.