Options Bulls Pounce as AMD Hits Record High

The weekly 1/3 series is hot on AMD stock today

Jan 2, 2020 at 2:47 PM
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Advanced Micro Devices, Inc. (NASDAQ:AMD) is at the top of the S&P 500 Index (SPX) today, after Nomura Instinet boosted its price target on the chip stock to $58 from $40 -- a 26.5% premium to AMD's 2019 close at $45.86. In reaction, the shares are up 6% at $48.60, earlier hitting a record high of $48.78.

The sharp spike higher has sparked a fire in the options pits, with 535,000 contracts on the tape so far, more than double what's typically seen at this point. The bulk of the action has occurred on the call side, with buy-to-open activity detected at the weekly 1/3 47-strike, 47.50-strike, and 48-strike calls. If this is the case, call buyers see bigger gains for AMD stock through tomorrow night's close, when these weekly options expire.

There's already a notable bullish bias among AMD options traders. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 2.37 registers in the 66th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Elsewhere on Wall Street, though, sentiment is more skeptical. For starters, 14 of 22 analysts maintain a lukewarm "hold" rating, and the average 12-month price target of $38.31 is a discount to current trading levels.

Plus, despite short interest falling 5.8% in the most recent reporting period, bears still control more than 9% of Advanced Micro Devices' available float. Should AMD stock continue to build on its 158% year-over-year gain, more bullish brokerage notes and/or additional short covering could create bigger tailwinds.

amd stock daily price chart on jan 2

 

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