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Advanced Micro Devices, Inc. (NYSE:AMD) Option Traders Eye Earnings

Are AMD short sellers hedging their bearish bets?

by 4/17/2013 12:32 PM
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Option players have been bullishly aligning themselves with Advanced Micro Devices, Inc. (NYSE:AMD) ahead of the company's turn at the earnings plate tomorrow. During the course of the past 10 sessions, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 25,007 calls, compared to 1,848 puts. The resultant call/put volume ratio of 13.53 ranks in the 92nd percentile of its annual range, implying calls have been picked up over puts with more quickness just 8% of the time within the past year.

Echoing this trend is the equity's Schaeffer's put/call open interest ratio (SOIR). Since March 19, AMD's SOIR has dropped to 0.33 from 0.41, as near-term call open interest rose nearly 17%. This ratio ranks in the 26th percentile of its annual range, suggesting short-term speculators are more call-skewed than usual toward the stock

Looking elsewhere on the Street, it appears this optimism toward Advanced Micro Devices isn't relegated to option players. Among covering analysts, 19 maintain a "hold" or worse suggestion toward the stock, compared to five who have deemed the stock a "buy" or better.

Plus, short interest rose 7.8% during the last two reporting periods, and now accounts for a brow-raising 18.5% of the stock's available float. It would take nearly eight sessions to cover these shorted shares, at AMD's average daily pace of trading. Given that AMD is sitting on a roughly 69% year-over-year deficit, this recent uptick in call activity may simply represent short sellers hedging their bearish bets ahead of earnings.

If this is indeed the case, these short sellers may have been taking note of the company's most recent quarterly announcement. After reporting a slimmer-than-expected loss in its fourth quarter, Advanced Micro Devices enjoyed an 11.4% pop in the subsequent session. For AMD's first quarter, analysts are calling for a loss of 17 cents per share.

In today's session, Advanced Micro Devices, Inc. (NYSE:AMD) is bucking the broad-market bloodshed, and was last seen 0.2% higher at $2.45.


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