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Short-Term Call Buyers Target Advanced Micro Devices, Inc. (AMD)

Advanced Micro Devices, Inc. calls were much more popular than puts on Friday

by 5/19/2014 9:57 AM
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Option Brief: Advanced Micro Devices, Inc. (NYSE:AMD) calls traded at nearly seven times the rate of puts on Friday, with short-term bets particularly in vogue. Nevertheless, the semiconductor stock's 30-day at-the-money implied volatility touched its lowest level in a year, and finished the session down 4.8% at 34.2%.

AMD's most active non-expiring strike was the June 4.50 call, where 3,144 contracts -- including a sweep of 2,164 -- crossed the tape. The majority traded off the ask, and open interest spiked by roughly 2,900 contracts over the weekend -- more than any other strike -- making it safe to assume the newly front-month bets were bought to open.

Friday's traders are either "vanilla" bulls expecting AMD to rally past $4.50 by the close on Friday, June 20 (when the contracts expire), or short sellers hedging against short-term upside in the shares. Lending credibility to the latter hypothesis: 18.6% of the equity's float is sold short, and the $4.40-$4.60 neighborhood has acted as a technical ceiling since mid-2012.

Advanced Micro Devices, Inc. (NYSE:AMD) closed at $4.02 last Friday. As such, delta on the calls finished the week at 0.17, representing a less than 1-in-5 chance the option will be in the money at expiration.


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