Advanced Micro Devices Stock Sell-Off Sparks Surge in Options Trading

A stock sale by Goldman Sachs is devastating AMD shares

Mar 3, 2017 at 12:51 PM
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Advanced Micro Devices, Inc. (NASDAQ:AMD) is selling off for the second day in a row. At last check, the semiconductor stock has shed 5.9% to trade at $13.08, after Goldman Sachs Group Inc (NYSE:GS) reportedly re-offered a block of 45 million shares below market value. Amid the technical slide, AMD stock and options volume are on track to settle in the 100th percentile of their respective annual ranges.

Drilling deeper, AMD options are crossing the tape at close to triple the expected intraday clip. It appears eleventh-hour bettors are purchasing new positions at the weekly 3/3 13-strike call and put, where nearly 32,000 contracts have collectively changed hands. The call buyers anticipate the shares will bounce back before tonight's close, when the series expires, while put buyers expect the stock will breach $13 over the next few hours.

Meanwhile, a longer-term trader may have initiated a straddle at the January 2019 15 strike, with matching blocks of 4,500 calls and puts trading for a combined premium of $9.10, or over $4 million (premium * number of contracts * 100 shares per contract). It's unclear whether this is a long or short straddle. If long, the buyer is anticipating a huge swing between now and January 2019, based on the upper and lower breakevens of $24.10 and $5.90, respectively (strike plus/minus net debit). On the other hand, if the options trader sold both positions, she's betting AMD will stay between those levels for nearly two years.

Technically speaking, the stock hasn't traded above $24.10 since October 2006. On the other hand, AMD shares were below $5.90 as recently as September.

That said, it certainly seems like Advanced Micro Devices, Inc. (NASDAQ:AMD) is locked in an upward course. Even after accounting for today's losses, the shares have surged 431% year-over-year. Not to mention, AMD stock's downside move has so far been contained by its 30-day exponential moving average, off of which the shares took a huge bounce in mid-November.

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