Advanced Micro Devices, Inc. (AMD) Stock, Option Volume Soar Amid Huge Week

Advanced Micro Devices, Inc. (NASDAQ:AMD) has jumped 28% this week, and options volume has surged

Nov 18, 2016 at 11:27 AM
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Stock volume has been surging in recent days on chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD), as the shares have climbed 28% this week. In today's trading, volume is running in the 95th annual percentile. It's unclear what exactly is driving the interest in AMD, but it could be related to a broader rally in semiconductor stocks.  Regardless, the action has now spread to AMD's options pits. 

Starting with yesterday's trading, both calls and puts changed hands well above their average daily volumes. On an absolute basis, though, calls had the clear edge, more than doubling the number of put options that traded, with over 178,000 contracts on the tape. In fact, nine of the 10 most popular options were calls. One option in particular that saw heavy action was the December 9 call, which some traders bought to open in hopes of AMD rallying above $9 before the option's expire on Friday, Dec. 20. At last check, AMD was docked at $8.57. 

Today's trading is shaping up somewhat differently, with puts and calls running neck and neck. Although puts are trading at three times the expected pace, it still appears speculators are taking an optimistic stance. Specifically, sell-to-open activity seems likely at the January 2018 5.50-strike put -- the most active option by far for the day -- meaning traders are betting on the stock holding above $5.50 for more than a year. 

Data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals call buying has more than doubled put buying during the past two weeks. On the other hand, the resulting call/put volume ratio of 2.27 sits in just the 28th annual percentile, indicating call buying has actually been less popular than normal, compared to put buying. 

No matter how they're betting, though, short-term options buyers seem to be getting a relative bargain at the moment, given AMD's Schaeffer's Volatility Index (SVI) of 66%, which ranks in the low 23rd percentile of its annual range. It's also promising for options traders that the stock's Schaeffer's Volatility Scorecard (SVS) is an elevated 95. So, not only is the options market pricing in low volatility expectations at the moment, but the stock has tended to make bigger moves during the past year, compared to what options traders have expected.

On the charts, Advanced Micro Devices, Inc. (NASDAQ:AMD) had been outperforming even before this week. Year-over-year, in fact, the stock has exploded for a 300% gain. AMD shares are now looking for their highest weekly close in more than five years. 

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