Calls Hot as Chip Stock Eyes Best Day Since January

AMD options traders are targeting more short-term gains

Managing Editor
Aug 8, 2019 at 1:45 PM
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The shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) are up 14% to trade at $33.68 today, after the chip concern announced its new processor chip will be featured in Alphabet (GOOGL) and Twitter (TWTR) data centers. In response to the outsized gains, AMD options traders have come out of the woodwork today. 

More specifically, AMD has seen almost 510,000 call options change hands today -- four times the average intraday amount and volume pacing for the 99th percentile of its annual range. Most active are the weekly 8/9 33 and 33.50-strike calls, where new positions are being opened. This indicates options buyers are betting on continued uptrend from the chip stock before the options expire this Friday, Aug. 9. 

This AMD call buying trend is nothing new, though. In the last 10 days, 246,267 long calls traded at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to 120,638 puts.

Meanwhile, AMD has had a tendency to make bigger moves than what options were pricing in over the past year. This is per the stock's Schaeffer's Volatility Scorecard (SVS) reading of 96 out of 100, meaning buying premiums on the stock has been an attractive strategy for options traders.

On the charts, AMD stock is headed for its best single-session gain since Jan. 30. After bouncing off support at its 120-day moving average last week, the security is now set to fill its late-July earnings-induced bear gap.

Daily Stock Chart AMD

Skepticism is still rampant, though. The majority of analysts rate AMD a "hold," leaving the door wide open for potential upgrades to drive further gains. Meanwhile, 12.6% of the stock's total available float is sold short, despite AMD boasting a 73% year-over-year gain.
 

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