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Option Brief: Advanced Micro Devices, Inc. (NYSE:AMD) is popular with option bulls today, as approximately 16,000 calls have switched hands since the opening bell. This is a 64% mark-up over the expected intraday norm, and more than triple the number of puts exchanged.
Snagging the lion's share of the attention is the weekly 1/10 4-strike call, where over 6,000 contracts have crossed the tape. The bulk of these calls traded at the ask price, implied volatility has ticked 5.1 percentage points higher, and today's volume exceeds current open interest levels -- all of which point to the initiation of new long positions.
In this scenario, the speculators are counting on AMD to power north of the $4 mark by the close on Jan. 10, when these weekly options expire. This denotes a rise of 3.6% from the stock's current price at $3.86, as well as territory not surmounted since Oct. 17 -- the day before an earnings-induced decline. Another possibility is that some of these out-of-the-money call buyers are looking to hedge their bearish bets, since short interest makes up 25% of the equity's available float.
However, the security has been in recovery mode lately, gaining 22.9% since touching a late-October low of $3.14. Meanwhile, the delta for the weekly call stands at 0.35, meaning the option has a more than 1-in-3 chance of being in the money at expiration. Should Advanced Micro Devices, Inc. (NYSE:AMD) remain below the strike price, the call buyers will forfeit the initial cash outlay.