2 Chip Stocks Seeing Heavy Options Volume

Call buyers have targeted QCOM despite the Broadcom buyout drama

Managing Editor
Mar 5, 2018 at 12:38 PM
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QUALCOMM, Inc. (NASDAQ:QCOM) is in the news today, after a U.S. security panel asked the company to delay tomorrow's annual shareholder meeting in order to review Broadcom's (AVGO) proposed buyout bid. Fellow chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD) is also in focus after Northland Capital assumed coverage with an "outperform" rating and $16 price target, and options volume for both chip stocks has been hot in recent weeks.

For instance, both QCOM and AMD stocks landed on Schaeffer's Senior Quantitative Analyst Rocky White's list of the 20 stocks that saw the heaviest options volume over the past 10 days. Names in yellow are new to the list since the last time the study was run. While call volume easily outpaces put volume for QCOM, AMD puts have surpassed calls in recent weeks.

most active stock options march 5

Qualcomm Call Buyers Pile On

More specifically, QCOM options traders have been busier than usual buying to open calls over puts. This is evidenced by the stock's 10-day call/put volume ratio of 5.75 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks 3 percentage points from a 52-week high. 

Looking closer, the April 72.50 call saw the largest increase in open interest during the past 10 days, with more than 26,000 contracts added. Next up is the front-month March 68 call, with roughly 25,500 contracts initiated. Data from the major options exchanges shows significant buy-to-open activity at each strike, suggesting speculators expect QCOM to break out over the next several weeks.

Since Broadcom's hostile takeover offer first surfaced in early November, QCOM shares have been hovering just below the initial $70 per share buyout bid, topping out at an annual high of $69.28 on Nov. 24. Overall, the stock has added over 23% over the past six months, and was last seen trading at $64.03.

Options Bears Hammer AMD Stock

Short-term options traders are unusually put-heavy on Advanced Micro Devices stock.  The equity's Schaeffer's put/call open interest ratio (SOIR) sits at 1.65, and ranks in the 98th percentile of its annual range.

Last Friday, put open interest surged to a record high of 1.57 million contracts. While the April 11 put is home to peak open interest of 214,538 contracts -- due in part to a recent delta-neutral strategist -- the April 12 put is also the site of a significant amount of contracts. According to Trade-Alert, there has been mostly buy-to-open activity here, as traders look for AMD to retreat through April options expiration.

While the $12 mark has served as both support and resistance since late 2016, the equity was last seen trading up 1.5% at $11.99. Longer term, AMD stock is up 16.6% year-to-date.


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