Chip Stock Cools Off from Record-Setting Winning Streak

In the past three months, the equity has added over 44%

Digital Content Manager
Aug 5, 2021 at 3:44 PM
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Semiconductor concern Advanced Micro Devices, Inc. (NASDAQ:AMD) is cooling off today, last seen down 5.1% at $112.7. The equity yesterday surged to an all-time high of $122.49, though, with tailwinds still blowing from last week's blowout quarterly earnings report. AMD was also the most heavily traded stock on Wall Street on Wednesday, with $24 billion worth of shares exchanging hands, while daily trading volume paced towards its highest level in over a year. In addition, the company released new graphics chips for Apple (AAPL) earlier this week.

Schaeffer's Quantitative Analyst Chris Prybal saw this surge coming way before it came to fruition. More specifically, his recommended call option scored subscribers a 201% return in just under a month. In the last three months, Advanced Micro Devices stock has added 44.6%, and is just now looking to snap its five-day streak of record closes.  

AMD

A sentiment shift over in the options pits could help the security resume its rally. This is per AMD's Schaeffer's put/call open interest ratio (SOIR), which stands higher than 76% of readings from the past 12 months. In simpler terms, options traders have rarely been more put-biased.

As far as today's options activity is concerned, 480,000 puts have crossed the tape so far, or double what is typically seen at this point. Most popular is the weekly 8/6 120-strike call, followed by the 115-strike call in the same weekly series, with positions being opened at both.

Though the brokerage bunch is already bullish towards Advanced Micro Devices stock, there is still some pessimism left to be unwound. Of the 25 analysts in coverage, eight call AMD a tepid "hold" or worse. Plus, the security looks ripe for a short squeeze. The 86.90 million shares sold short make up 7.2% of AMD's available float. Should short sellers start to hit the exits, the equity could surge even higher.

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