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Call Buying Surges on Advanced Micro Devices, Inc. (NYSE:AMD)

Speculative players have shown a sudden interest in AMD call options

by 4/11/2013 12:15 PM
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Options traders have taken a sudden interest in bullish bets on Advanced Micro Devices, Inc. (NYSE:AMD). As recently as last Friday, puts were the options of choice on the chip stock, but there's been a significant surge in call buying during the past several sessions. Over the past five days alone, speculators on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 11,150 calls on AMD, compared to only 448 puts.

Looking back over the past 10 days, options players on the ISE, CBOE, and NASDAQ OMX PHLX (PHLX) have purchased 14.51 calls for every put on Advanced Micro Devices. This ratio ranks higher than 94% of other such readings taken during the past year, which means options players on these three exchanges have rarely bought to open calls over puts at a faster clip.

As indicated earlier, that ratio has made a big leap over the past week. As recently as Thursday, April 4, AMD's 10-day ISE/CBOE/PHLX call/put volume ratio was a much slimmer 0.69 -- indicating a relative preference for puts.

In the front-month series, the April 3 call has been a popular choice lately. This out-of-the-money strike has gained more than 3,000 contracts in open interest during the past five sessions, and now has 39,169 contracts in residence. Beyond that, the April 3.50 strike is home to peak call open interest of 44,366 contracts.

Technically speaking, the shares of Advanced Micro Devices haven't surmounted the $3 level since last October, when the stock staged a bearish gap below this area. Meanwhile, a few recent rally attempts have been stifled by AMD's descending 150-day moving average, which is currently located at $2.63 -- just above the stock's perch at $2.52.

Given the equity's lackluster price action, it's possible that options traders are scooping up out-of-the-money calls simply to hedge their shorted AMD shares. Currently, no less than 18.5% of the stock's float is sold short. With the company slated to report its first-quarter earnings after the close next Thursday, April 18, these next few days are an opportune time for bears to pick up some insurance against a potential post-report rally.


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