Stocks quoted in this article:
The 20 stocks listed in the table below are the S&P 400 MidCap Index (MID) components that have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest today is semiconductor concern Advanced Micro Devices, Inc. (NYSE:AMD), which has seen accelerated call volume.
Advanced Micro Devices, Inc. has added 0.7% to flirt with $4.17, bringing its year-to-date gain to 7.7%. Options traders today are betting on the stock to fill its post-earnings bear gap from mid-July in the next few weeks, buying to open short-term calls.
Overall call volume is running at a 75% mark-up to the intraday average, with roughly 11,000 contracts exchanged. For comparison, fewer than 750 AMD puts have traded. Reflecting the healthy appetite for short-term options, the stock's 30-day at-the-money (ATM) implied volatility (IV) is up 2.5% to 40.9%.
Most active by a mile is the weekly 9/26 4.50-strike call, which has accounted for about half the total call volume thus far. Four-fifths of the calls traded on the ask side, and volume has surpassed open interest at the strike, hinting at newly bought bullish bets.
By purchasing the calls at a volume-weighted average price (VWAP) of $0.07, the buyers will profit if AMD is sitting atop $4.57 (strike plus VWAP) -- the stock's closing price before the aforementioned bear gap -- at the close on Friday, Sept. 26, when the options expire. Profit potential is theoretically unlimited north of breakeven, while risk is capped at the initial premium paid for the calls, should AMD fail to topple the strike by expiration.
It's worth noting, however, that short interest accounts for 22.5% of AMD's total available float. At the stock's average pace of trading, it would take about a week to repurchase all of these bearish bets. Against this backdrop, it's possible that shorts are buying the aforementioned calls to hedge against an extended short-term rebound.
Whatever the motive -- and despite ATM IV edging higher today -- now is an opportune time for buyers to roll the dice with short-term options. Advanced Micro Devices, Inc.'s (NYSE:AMD) Schaeffer's Volatility Index (SVI) of 40% sits in the bottom quartile of its annual range, suggesting the equity's front-month contracts are historically inexpensive right now.