Unusual Options Activity: Advanced Micro Devices (AMD)

Shares of semiconductor firm Advanced Micro Devices (AMD) have traded flat over the past month following a longer-term rally. One trader sees that rally resuming in the coming weeks.

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  • That’s based on the October 8 $115 calls. With 28 days until expiration, just under 6,300 contracts traded against a prior open interest of 162, for a 39-fold rise in volume. The buyer of the calls paid $1.81 to make the trade.

    With shares around $106, they’d need to rise $9, or about 8.4 percent in the next month for the option to move in-the-money.

    Shares surged as high as $122 at the start of August before getting to their current decline. The recent drop still leaves shares up 38 percent over the past year, just slightly better than the S&P 500 index over the same timeframe.

    Action to take: With 350 percent earnings growth over the past year, a near-doubling in revenue, and fat profit margins of nearly 26 percent, this is a great company to buy on its recent pullback. The downside to share ownership is simply the fact that shares don’t pay a dividend.

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  • Traders may like this call option, although with only one month left on the clock, it will quickly lose value. Traders looking for a surer bet may want to go out 3-4 months, but for those looking for a quick mid double-digit profit, the option can likely deliver in the coming weeks.

     

    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.