Advanced Micro Devices, Inc. (AMD) Targeted By Pre-Earnings Bears

Advanced Micro Devices, Inc. (AMD) will report fourth-quarter earnings after tonight's close

by Karee Venema

Published on Jan 20, 2015 at 2:40 PM
Updated on Apr 20, 2015 at 5:32 PM

Advanced Micro Devices, Inc. (NASDAQ: AMD) is slated to unveil its fourth-quarter earnings results after tonight's close. Ahead of the event, the stock has plunged 6.3% to churn near $2.24 -- after earlier hitting a fresh two-year low of $2.19 -- and put volume is soaring. Specifically, puts are trading at four times what's typically seen at this point in the day, and are outpacing calls by a 6-to-1 ratio.

A significant portion of the day's activity occurred when a 15,000-contract lot of April 2.50 puts crossed the tape at the same time that two blocks totaling 10,000 contracts went off at the April 2 put. One theory suggested by Trade-Alert is that a speculator sold to close her now in-the-money April 2.50 puts and bought the April 2 puts, as she rolls down her bearish bet.

This wouldn't be too much of a stretch for AMD options traders. In fact, over the past two weeks, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than 27 puts for each call. What's more, the resultant put/call volume ratio of 27.38 sits at an annual bearish peak.

Echoing this put-skewed bias is AMD's Schaeffer's put/call open interest ratio (SOIR) of 3.76. Not only does this show that put open interest nearly quadruples call open interest among options set to expire in three months or less, but it rests higher than all other readings taken in the past 12 months. In other words, short-term speculators are more put-heavy now on AMD than they've been at any other point during the past year.

Historically speaking, Advanced Micro Devices, Inc. (NASDAQ: AMD) tends to make big moves in the wake of its earnings results. After unveiling its quarterly report last July, for example, the stock shed 16.2% in the subsequent session. The quarter prior, meanwhile, the equity notched an 11.7% single-session post-earnings gain. This time around, the options market is expecting a move in the 16.1%-19% range, based on the respective pricing of AMD's weekly 1/23 2- and 2.50-strike straddles.


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