AMD, NVIDIA Options a Bargain Ahead of Earnings

Traders can scoop up AMD and NVDA options on the cheap right now

Apr 21, 2017 at 11:00 AM
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Yesterday, we highlighted 25 options trading ideas for earnings season, based on attractively priced options. Today, we'll be taking a closer look at a pair of high-profile semiconductor stocks that made the list -- Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA).

AMD Options Traders May Want to Buy Pre-Earnings Calls

AMD will report earnings after the close on Monday, May 1. Ahead of this event, the stock's options are surprisingly affordable, from a volatility perspective. AMD's Schaeffer's Volatility Index (SVI) of 66% ranks in the low 36th annual percentile. Not to mention, the shares have a Schaeffer's Volatility Scorecard (SVS) of 97, suggesting they've tended to make bolder moves than the options market has priced in over the past 12 months.

Those looking to place pre-earnings bets on AMD stock may want to consider calls over puts. While the stock's pulled back from its Feb. 28 nine-year high of $15.55 -- last seen 0.8% lower at $13.01 -- it's more than tripled in value over the last 52 weeks. Not to mention, the shares just touched their 80-day moving average, which is a historically bullish signal. Looking back three years, AMD has touched this trendline six times, and averaged a 21-day post-signal return of 9.8%, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

amd stock chart today

If that's not enough, Advanced Micro Devices, Inc. shares have recently been hot after earnings. In three of the past four quarters, the stock has advanced in the post-event session -- including a 16.3% bull gap in early February. This time around, the options market is pricing in an 11.3% move in either direction for AMD stock.

NVIDIA Options Traders Active Ahead of Earnings

NVDA's short-term options are attractively priced, too, based on various volatility metrics. The stock's SVI of 43% sits below roughly 70% of all comparable readings recorded in the past year. Plus, the shares have an SVS of 97, suggesting they've outperformed the expectations of the options market over the long haul.

Like AMD, NVDA stock has been a beast on the charts, even after recently entering into a period of consolidation near the round $100 level, home to its rising 120-day moving average. At $101.64, the shares have surged 180% year-over-year. More upside could ensue after NVDA's May 9 earnings report, too. The stock has advanced 75% of the time in the session following the chipmaker's last eight turns in the confessional, including four double-digit percentage gains.

Perhaps this explains why NVDA options traders have been so call-skewed. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.85 ranks below 99% of all other readings from the past year. This, as open interest on both NVIDIA Corporation call and put options registers at an annual high.
 

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