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Traders Gamble On Upside for Advanced Micro Devices, Inc. (AMD)

Advanced Micro Devices, Inc. call buying may be speculative or protective

by 3/21/2014 10:15 AM
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Option Brief: Advanced Micro Devices, Inc. (NYSE:AMD) call volume edged out put volume yesterday -- 14,000 contracts to 11,000. Most active was the July 4.50 call, which saw 4,030 contracts -- including a sweep of more than 3,600 -- change hands during the course of the session.

Almost all of the volume at that out-of-the-money strike crossed at the ask price, hinting at buyer-driven action. What's more, implied volatility ticked higher and open interest added nearly 3,400 contracts overnight, making it safe to assume the bets were freshly minted.

A couple of motives may help to explain yesterday's AMD call buying. On the one hand, the speculators may expect the shares -- currently hovering at $4.08 -- to muscle north of $4.50 by July options expiration. On the other hand, they may be short sellers hedging against potential gains by initiating protective calls. After all, as my colleague Andrea Kramer recently pointed out, more than one-fifth of the stock's outstanding float is sold short.

On the charts, AMD has tacked on nearly 55% in the last 12 months. However, it's worth noting that the $4.50 level has served as a layer of technical resistance during the past two years, and recently short-circuited a rally in January.

On the fundamental front, Advanced Micro Devices, Inc. (NYSE:AMD) said yesterday it had appointed Nora Denzel and Mike Inglis to its board of directors. Also, the semiconductor name announced that it had completed its partial tender offer for its 8.125% senior notes due in 2017.


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