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Advanced Micro Devices, Inc. option bears are active ahead of earnings
The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest today is semiconductor concern Advanced Micro Devices, Inc. (NYSE:AMD), which will step into the earnings confessional in just a few hours.
Advanced Micro Devices, Inc. is bucking the broad-market trend lower, up 2.3% at $2.67 ahead of the company's quarterly earnings release. In the options pits, the stock's 30-day at-the-money (ATM) implied volatility (IV) was last seen 1.4% higher at 95.5%, after earlier notching a new annual high, reflecting the growing demand for short-term contracts.
Digging deeper, overall options volume is running at a roughly 21% mark-up to the norm, though puts have outnumbered calls by a margin of more than 2-to-1. While a healthy portion of the action consists of a calendar spread at the November and January 2015 2.50-strike puts, eleventh-hour bears are buying to open the October 2 put, where IV has skyrocketed more than 60 percentage points.
By purchasing the puts to open, the speculators expect AMD to breach $2 by tomorrow's close, when the front-month options expire. Should the stock remain atop the strike through the end of the week, thereby avoiding a new nearly two-year low, the most the buyers will forfeit is the initial premium paid for the puts.
On the flip side, last-minute option bulls are buying to open the October 3 call, amid expectations for AMD to rally north of $3 by tomorrow's close. Again, risk is capped at the initial net debit, should the stock fail to make the desired move in time. Of note, a portion of the volume here may have been combined with the October 3 put to initiate a short straddle, as one speculator hopes to exploit pricey premiums.
Broadening our sentiment scope, we find that today's preference for bearish bets merely echoes the growing trend on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where traders have bought to open 2.57 AMD puts for every call during the past two weeks. In fact, the resulting 10-day put/call volume ratio sits at a 52-week peak, implying that option buyers have initiated bearish bets over bullish at fever pitch.
Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.81 also rests at a 12-month high, indicating that short-term speculators haven't been more put-biased during the past year. Meanwhile, short interest accounts for 21.5% of AMD's total available float, representing more than a week's worth of pent-up buying demand, at the stock's average daily trading volume.
Technically speaking, it's no surprise to find Wall Street in the bears' camp, as Advanced Micro Devices, Inc. (NYSE:AMD) has surrendered 31% in 2014, and touched a new annual low of $2.54 both yesterday and today. However, the stock's 14-day Relative Strength Index (RSI) is now perched at a paltry 10 -- deep into oversold territory, suggesting the stars may have been aligning for today's bounce.