Advanced Micro Devices Inc (NASDAQ:AMD) is experiencing a notable amount of unusual options activity, with a large number of in-the-money put options and a significant call option tranche. This activity, as reported by Barchart’s Unusual Stock Options Activity Report, raises questions about whether investors are hedging their bullish bets or if there’s a bearish sentiment seeing AMD at a peak.
The reported options trades involve large volumes, ranging from 42 to 63 times the outstanding option contracts at various strike prices. For instance, over 22,400 put contracts were traded at the $138 strike price, indicating that these are already in the money given AMD’s current stock price of $137.19.
The breakeven level for these puts is calculated at $135.63, suggesting that for put option buyers to profit, AMD stock needs to fall another $1.56 before reaching breakeven. The article suggests that many of these put option buyers may already be shareholders looking to hedge their bets in case AMD stock experiences a further decline.
The observation that all of the put contracts are in the money could indicate a negative sentiment among put buyers, potentially driven by the recent rise in AMD stock. The chart shows a significant increase from a recent low of $93.66 at the end of October to a current level up over 46% in the past month and a half.
The rise in AMD stock is attributed to its strong Q3 performance, with a 4% YoY increase in revenue and 8% higher QoQ. Earnings per share saw a significant improvement, rising to 18 cents compared to just 4 cents a year ago. The company also reported $297 million in free cash flow for the quarter, representing 5.1% of its Q3 revenue of $5.8 billion.
However, concerns are raised about the sustainability of this rise and whether AMD can maintain its free cash flow and margins. The surge in put options trading suggests some investors may anticipate a potential drop in AMD stock in the near term. Overall, the article advises caution for investors in AMD, given the significant volume in near-term put options that could add pressure on the stock.
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