Advanced Micro Devices, Inc. (AMD) and the $3.5 Million Bet

One speculator bought to open 100,000 Advanced Micro Devices, Inc. (AMD) puts

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Published on Jan 7, 2015 at 1:51 PM
Updated on Apr 20, 2015 at 5:32 PM

Advanced Micro Devices, Inc. (NASDAQ:AMD) is sitting out the broad-market rally, off 1.9% this afternoon to trade at $2.58. Meanwhile, one options trader placed an ambitious downside bet on the stock.

AMD puts are changing hands at nearly 40 times the usual intraday pace, and most of this can be traced to a 100,000-contract block that crossed at the July 2.50 strike. According to Trade-Alert, this transaction is the biggest of the year, and the contracts were bought to open for an initial cash outlay of $3.5 million (100,000 contracts * $0.35 premium * 100 shares per contract). This represents the speculator's maximum risk, should AMD settle at or above the strike at July options expiration. On the flip side, the put buyer will profit on a move down to zero in the underlying.

Today's preference for purchasing puts is more of the same for AMD. The stock's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.14, which ranks in the bearishly skewed 87th percentile of its annual range.

This negativity shouldn't be surprising, as Advanced Micro Devices, Inc. (NASDAQ:AMD) is a long-term technical laggard. Year-over-year, the shares have swallowed a loss of more than 38%.


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