Advanced Micro Devices, Inc. (AMD) Trader Sets a $1.25 Million Ceiling

Advanced Micro Devices, Inc. (AMD) hasn't traded north of $3 since early October

by Karee Venema

Published on Feb 4, 2015 at 10:28 AM
Updated on Apr 20, 2015 at 5:32 PM

Advanced Micro Devices, Inc. (NASDAQ:AMD) calls traded at eight times the average daily rate yesterday, and outpaced puts by a 17-to-1 margin. Taking a closer look at the day's action reveals not all of the activity was of the traditional bullish variety, though, as one speculator bet big on the stock to stall out near $3 over the next several months.

Specifically, one massive block of 50,000 July 3 calls was sold to open for $0.25 apiece, resulting in an initial net credit of $1.25 million (number of contracts * premium collected * 100 shares per contract). This represents the maximum reward on the play, should AMD continue to churn south of $3 through July options expiration. Risk, meanwhile, is theoretically unlimited, as there's no limit to how high AMD could climb.

Widening the sentiment scope shows skepticism has been prevalent toward a stock that's shed nearly 42% since hitting a two-year high of $4.80 in July -- and hasn't traded north of $3 since early October. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, AMD's 50-day put/call volume ratio of 2.70 ranks just 7 percentage points from an annual bearish peak.

Echoing this is AMD's Schaeffer's put/call open interest ratio (SOIR) of 2.05, which ranks higher than 96% of similar readings taken in the past year. In other words, short-term speculators have rarely been as put-heavy on the stock as they are now. Today, Advanced Micro Devices, Inc. (NASDAQ:AMD) is extending Monday's analyst-induced momentum -- up 1.4% at $2.80.

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