Call Traders Blitz Red-Hot Chip Stock

AMD hit a record high earlier today

Managing Editor
Jul 22, 2020 at 2:58 PM
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Lost in the shuffle of today's vaccine news and China tensions are the outsized gains from Advanced Micro Devices, Inc. (NASDAQ:AMD). The chip stock was last seen trading up 7.4%, and earlier hit a fresh record high of $61.89. Today's breakout likely comes in the wake of sector peer Texas Instruments' (TXN) blowout corporate report, and the encouraging sales numbers from electronics retailer Best Buy (BBY). Whatever the catalyst, AMD's options pits have sprung to life today.

At last check over 675,000 calls have changed hands today, triple the average intraday amount and volume pacing for the 100th percentile of its annual range. Leading the charge is the weekly 7/24 60-strike call, where new positions are being opened. Buyers of these calls are banking on that $60 level to hold as support by the close on Friday, when the contracts expire.

The appetite for calls is nothing new. AMD's 10-day call/put volume ratio of 4.93 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits 4 percentage points from an annual high, underscoring the unusual preference for calls in the last two weeks. 

Options are an intriguing route right now, considering AMD's attractively priced premiums. The stock's Schaeffer's Volatility Index (SVI) of 59% stands higher than 25% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

Should today's results hold, it will be the semiconductor stock's best single-session gain  since April 6. It bring's AMD's total year-to-date tally to 34%, with the shares' 160-day moving average containing pullbacks in March and June. And lest we forget, the equity flashed a bullish signal two weeks ago.

Daily Stock Chart AMD

 

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