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Advanced Micro Devices, Inc. (NYSE:AMD) options players are expressing optimism on earnings eve by targeting short-term calls. Over 39,000 call contracts have changed hands so far today, easily doubling the typical intraday trading volume. On the flip side, just 11,000 put contracts have been exchanged. AMD shares are currently rising along with the market, up 1.5% at $4.08.
Most active is the in-the-money October 4 call, where over 19,000 contracts have crossed the tape. The lion's share of the volume has traded at the ask price, and implied volatility (IV) has spiked 12 percentage points to 104.5%. This collectively points to buy-to-open activity, which data from the International Securities Exchange (ISE) supports.
Based on the rise in IV -- which is well above the stock's one-month historical volatility measure of 31.1% -- investors are willing to pay up for these pre-earnings bets. Today's volume echoes similar -- though more aggressive -- trading we noted on Monday when investors were focused on the out-of-the-money October 4.50 calls.
No matter which strike call buyers are targeting, they have only risked their premium paid, should AMD fail to make headway ahead of Friday's closing bell, when October options expire. And given that almost 22% of AMD's float is sold short, some of the recent call buyers may actually be bears in disguise, looking to establish pre-earnings, short-term hedges.
AMD will report its third-quarter results after tomorrow's close, and analysts are expecting earnings of 2 cents per share. Last quarter, Advanced Micro Devices, Inc. (NYSE:AMD) topped per-share estimates by 3 cents, but dipped 13.2% the following day, likely the result of an 18% drop in sales.
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