AMD has struggled to break past the $14.50 level this year
Apple supplier Advanced Micro Devices, Inc. (NASDAQ:AMD) is set to report second-quarter earnings tomorrow night and investors are keeping an eye trained on the tech name, which has a volatile history of post-earnings price moves. Below, we will take a look at the chip stock, and see how AMD options traders are positioning themselves ahead of the scheduled event.
AMD is up 2.1% today to trade at $14.17, after Canaccord Genuity reiterated its "buy" rating and $20 price target -- territory not charted since January 2007 -- saying that while "competitive risks remain," the "risk/reward is still tilted toward the upside." The bullish brokerage attention had the shares flirting with the $14.40-$14.50 level earlier, though AMD stock quickly retreated from here, as it has done repeatedly throughout 2017. Nevertheless, AMD shares remain up 24% year-to-date.
Heading into tomorrow's report, there has been considerable interest in AMD calls, with 1.12 million contracts currently open -- in the 77th annual percentile. Today, 147,641 call options have changed hands, putting volume on track to settle in the 87th percentile of its annual range. Most active are the weekly 7/28 14.50- and 16.50-strike calls, with nearly 23,000 contracts traded. Buy-to-open activity seems likely, as traders bet on more upside by expiration at this Friday's close.
However, put buying has picked up relative to call buying in recent weeks, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). AMD stock's 10-day put/call volume ratio across these exchanges has risen to 0.62 from 0.38 in the past two weeks, and the current ratio ranks in the 94th percentile of its annual range. Given AMD's year-to-date gain, some of this could be indicative of shareholders initiating options hedges.
Historically speaking, AMD stock has averaged a one-day move of 15.6% in either direction in the session following the last eight earnings releases. Five times, the shares have closed lower, including a 24.2% plunge last May. This time around, the options market is betting on a wider 17.3% swing for Wednesday's trading.