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Option players targeted Advanced Micro Devices, Inc. (NYSE:AMD - 2.60) on Monday, with both calls and puts trading at accelerated levels. By the numbers, around 23,000 calls crossed the tape, more than tripling the average daily pace. Meanwhile, roughly 21,000 puts changed hands, representing more than four times the expected volume.
On the call side of the aisle, traders turned to AMD's April 3 calls. All of the 2,005 contracts traded here crossed at the ask price, implied volatility ticked 1.2 percentage points higher, and open interest rose overnight, pointing to the initiation of new bullish positions. The out-of-the-money calls were purchased for a volume-weighted average price (VWAP) of $0.09. Simply put, the speculators will begin to profit with each step north of $3.09 (strike plus VWAP) AMD takes through the close on Friday, April 19 -- when back-month options expire. At last night's close, delta for the call was sitting at 0.27, or 27%, suggesting a more than 1-in-4 chance the position will expire in profitable territory.
On the put side of the fence, option players were quick to scoop up the stock's March 3 strike. Of the 1,182 contracts traded here, 92% went off at the ask price, implied volatility surged 15.3 percentage points, and open interest added 797 positions overnight, hinting at buy-to-open activity. Breakeven for these in-the-money puts is $2.56 (strike less VWAP of $0.44), or just a chip shot away from AMD's present levels. As such, delta for the put is currently perched at negative 0.95, implying a 95% chance the option will finish in the money by this Friday's close, when front-month options expire.
From a wider sentiment standpoint, option traders have been picking up puts over calls with some rapidity in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.90 ranks higher than 94% of similar readings taken in the past year. In other words, puts have been bought to open over calls at a near annual-high clip during the last 10 weeks.
This mixed bag of investor sentiment is understandable when looking at AMD's technical backdrop. Despite bouncing around 44% from its mid-November low of $1.81, the stock is still staring down a steep 65% year-over-year deficit. More recently, the equity has been churning in the $2.30-to-$2.80 range since early December.
The stock is trading higher in today's session, after announcing it will sell, and subsequently lease, its Austin, Texas-based campus. The sale is expected to garner roughly $164 million for the chip maker, of which $50 million will be tacked on as a special charge to its first-quarter earnings report. At last check, AMD was up 0.4% to trade at $2.60.