Surge in call options expiring Friday.
Over 122,140 contracts expiring on Friday at a $42 strike price for Advanced Micro Devices (AMD) changed hands—a 25-fold surge in volume over the prior open interest of 4,800.
Shares of the company currently trade at $41, meaning a 2.4 percent increase in shares in the next two trading days is necessary for the options to move in-the-money. If that doesn’t happen, the option will expire worthless.
- 2021’s Hottest Electric Vehicle Stocks – Yours Free
This year could be the biggest one yet for the unstoppable electric vehicle megatrend — but if you’re looking to take advantage, the time to act is now.
That’s why Luke Lango has just released his picks for the 11 best EV stocks of 2021. Each one has been hand-selected for its potential to deliver life-changing profits as electric vehicles continue to disrupt the automotive industry.
The company has rallied strongly recently, with shares hitting new 52-week highs.
Action to take: We like buying call options on AMD as a momentum trade. The alternative, shorting shares with a put option trade, hasn’t made much sense with such bullish sentiment right now.
While the option is cheap at just $0.35 per contract… the short time before expiration makes this a dicey proposition, even if shares close in on $42.
Speculators should look at the May 2020 $45 calls instead. While far pricier at $4.15, they have a much better chance of playing the share momentum higher in the coming months rather than the dice roll of a closely-expiring trade.
Investors may want to consider playing the momentum in shares as well. But on a valuation basis, shares are starting to get a little stretched here. They may continue to go higher for a bit, but patient investors can likely get in under $35.00 on one of the company’s numerous pullbacks.