Puts Hot as Advanced Micro Devices, Inc. (AMD) Turns Tail

Advanced Micro Devices, Inc. (NASDAQ:AMD) surged 52% on Friday, only to plunge 12% today

Apr 25, 2016 at 3:18 PM
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Advanced Micro Devices, Inc. (NASDAQ:AMD) gapped more than 50% higher last Friday, after the semiconductor firm's stellar earnings report was met with a round of bullish brokerage notes. Today, however, AMD has plunged 12.3% to $3.50 -- and with the stock squarely on the short-sale restricted list, put volume has jumped to six times the average intraday rate, with 36,000 put options on the tape at last check.

More than half of the intraday put volume is a result of two blocks totaling 18,436 contracts that traded at AMD's July 3 strike. According to the International Securities Exchange (ISE), it looks as if these puts were bought to open for an initial cash outlay of $460,900 (number of contracts * $0.25 premium paid * 100 shares per contract). This is also the most the speculator stands to lose, should AMD settle south of $3 when the puts expire at the close on Friday, July 15. Profit, meanwhile, will accumulate on a move down to zero.

From a wider perspective, today's accelerated put activity is just more of the same. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMD's 10-day put/call volume ratio of 0.74 ranks higher than 70% of all comparable readings taken in the past year. In other words, puts have been bought to open over calls at a faster-than-usual clip.

Diving deeper, AMD's May 2.50 put has seen the biggest rise in open interest over this two-week time frame, with 21,129 contracts added. According to Trade-Alert, it looks like the majority of the action here is also a result of another big block trader who expects Advanced Micro Devices, Inc. (NASDAQ:AMD) to sink to levels not seen since mid-March.

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