The recent movements in the options market indicate that shareholders of AMD stock need to pay close attention to Advanced Micro Devices Inc.’s (NASDAQ:AMD) shares. This is since the implied volatility of the January 20, 2023, $115.00 Call was among the highest of any equity option available today.
Implied AMD Stock Volatility
The market’s expectation of the amount of movement that will occur in the future is implied volatility. Options with high implied volatility indicate that investors in the underlying stocks anticipate a significant move in either direction. It’s also possible that it means an important event is coming up soon that will trigger a significant price increase or decrease. However, implied volatility is simply one element of the picture when putting together an options trading strategy.
What Do You Think the Analysts Believe?
There is no question that options traders are pricing in a significant rise for AMD stock; however, what is the real picture for the firm now? The current position of AMD stock within the Electronics – Semiconductors industry places it in the Bottom 35% of our Zacks Industry Rank. This position earns the company a Zacks Rank #5 (Strong Sell). During the past 60 days, not a single analyst has revised their profit forecasts for the current quarter, while eleven experts have done the opposite. Due to the overall impact, the Zacks Consensus Estimate for the current quarter has been reduced to 75 cents per share from the previous estimate of $1.06 per share.
This extremely high implied volatility may indicate that a trade is in the process of emerging, taking into consideration how analysts currently feel about Advanced Micro Devices. When looking to sell premiums, options traders frequently search for options with significant implied volatility. Because it takes advantage of decay, this trading method is utilized by many seasoned market participants. At the expiry time, these traders anticipate that the underlying stock will not move as much as they had previously anticipated it would.
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Author Faith Yakubu