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Advanced Micro Devices, Inc. (NYSE:AMD - 2.74) is being heavily targeted by put players in today's session. Roughly 14,000 contracts have crossed the tape so far, or more than five times the average intraday volume for put options. Near-term traders have turned their attention to AMD's February series of options, and are placing bets the stock will slide over the next four weeks.
The most active strike on the day is the February 2.50 put, which has seen almost 7,600 contracts change hands. The majority of these have gone off at the ask price, and volume is easily outstripping open interest, hinting at buy-to-open activity. By purchasing these out-of-the-money puts for a volume-weighted average price (VWAP) of $0.12, traders need AMD to drop 13.1% to land below breakeven at $2.38 (strike less VWAP) by the close on Friday, Feb. 15, at which point the options will expire.
Meanwhile, the February 2 put is also seeing notable action. All of the 5,000 puts that have traded here crossed at the ask price, and implied volatility was last seen more than 13 percentage points higher, indicating the initiation of new bearish positions. With these deeper-out-of-the-money puts trading for a VWAP of $0.03, breakeven is $1.97 (strike minus VWAP), or 28.1% below the stock's current perch.
On the charts, AMD has been making a run higher in recent months, with the shares up around 51% from their Nov. 16 low of $1.81. Additionally, the equity has outpaced the broader S&P 500 Index (SPX) by almost 33 percentage points throughout the past 40 sessions. In light of this, today's rush toward out-of-the-money puts could be shareholders protecting their modest profits against a potential pullback.
In fact, the semiconductor concern is slated to take its turn in the earnings confessional after the market closes next Tuesday, Jan. 22. The company has fallen short of analysts' bottom-line estimates in each of the last two quarters, and these misses were subsequently followed by a double-digit percentage drop in the stock's price. For AMD's fourth quarter, Wall Street is projecting a loss of 20 cents per share.