Unusual Options Activity: Advanced Micro Devices (AMD)

The recent selloff in tech has caused a number of big-name companies benefitting from the semiconductor shortage to decline. One such name is Advanced Micro Devices (AMD). At least one trader sees room for a rally ahead.

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  • That’s based on the March 2022 $77.50 calls. With 298 days until expiration, over 13,300 contracts traded, a 60-fold rise in volume from the prior open interest of 222. The buyer of the calls paid about $11.40 for the option.

    With shares around $78, the option is an at-the-money trade. It should rise in value along with the price of shares. AMD has traded as high as $99 in the past year, leaving it about 22 percent below its all-time high. On a rebound to $99, the $77.50 calls would be worth $21.50, or nearly double from here.

    Thanks to the recent weakness in shares, AMD is now trading about in line with the S&P 500 in the past year, even as revenue has soared 93 percent and earnings are up nearly 243 percent in the same timeframe.

    Action to take: This is a company firing on all cylinders, and likely to continue to perform well operationally. Once the market gets over its latest funk, shares are likely to continue to move higher.

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  • Traders may want to take advantage of this at-the-money option to benefit from the next rebound in shares. A quick jump higher in shares could lead to a mid-to-high double-digit move in shares well before expiration, leading to a quick profit.

     

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