Traders Mine for Cheap AMD Puts as Bitcoin Plummets

Despite the stock's recent losses, AMD put options are cheaper than calls

Dec 22, 2017 at 2:13 PM
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Chip giant Advanced Micro Devices, Inc. (NYSE:AMD) is getting hammered today in sympathy with cryptocurrency stocks. AMD is off 3.7% to trade at $10.48, as the steep multi-session collapse in bitcoin prices has raised concerns that a surge in chip demand spurred by bitcoin mining could fade as quickly as it appeared.

In response, AMD put volume has surged today. Over 71,000 puts have changed hands so far, representing double the stock's expected intraday activity (and pacing in the 89th percentile of its annual range). Some eleventh-hour speculators are buying to open AMD's weekly 12/22 10.50-strike put, with these bears looking for the security to extend its slide through today's closing bell.

From a broader perspective, puts are definitely the options of choice on AMD. Put open interest on the stock arrived today at a new 52-week high in excess of 1.1 million contracts, per Trade-Alert. The top put open interest position is the January 2018 12-strike put, with 171,931 in-the-money contracts in residence here.

It's easy to see why speculators are favoring bearish bets over bullish. After a big ramp higher in 2016, Advanced Micro shares have been choppy in 2017, with downside momentum accelerating after a late-October break of their 200-day moving average. The round $10 level may soon have a chance to step up and provide support, as it's done throughout the calendar year.

AMD shares sell off on bitcoin mining concerns

Despite the equity's technical struggles, AMD put options are surprisingly affordable. Trade-Alert places the stock's 30-day at-the-money implied volatility (IV) at 41.9%, in the 4th percentile of its annual range. In other words, short-term options are pricing in extremely low volatility expectations. Likewise, the 30-day IV skew of -4.3% indicates that AMD calls are actually pricing in steeper volatility premiums than their put counterparts.

 

 

 

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