How To Trade Today's AMD Earnings

AMD is about to post earnings soon after this hits your inbox, after markets close today (along with GOOGL). Options traders are staking some big claims about what the outcome of that earnings release will be.

But before I get into where I think AMD will land, I'd like to go over a few points.

First off, AMD has had a wide range this year starting around $134, hitting a high of $226 and currently printing around $164 having only hit $150 6 days ago. What this translates into is AMD is sitting towards the lower end of the yearly range.

Clearly, the chip stock is not having the same banner year as rival and AI darling NVDA is.

From an options perspective, the implied move traders are estimating is, as I'm writing this, a $13 move up or down. This puts the options IM (implied move) to the upside around $177 while a downside IM is projected around $150.

Which brings me to how I think AMD's stock price will react to these earnings.

The key with analyzing earnings and the options IM is coordinating that with current options positioning. Looking at the new options positioning tool in the Benzinga Option School, we can see where the money is parked with the green bars being calls and the red bars being puts. I have to note how calls outweigh puts by a lot. Our top OI (open interest) call is 160, which is just below the current price.

$AMD Open Interest (2 week look forward period)

Looking at the upside, I see pretty solid positioning up to $180, which is just above the upside options implied move ($177). I also see a ‘moonshot' target of $210, which is probably end of year or January op-ex (options expiration) bullish targets.

To the downside, I see the top OI put at $150, which aligns with the downside implied move in options. Below that, I see decent OI till $140, with a big reduction after.

Hence, bears are saying $150, maybe $140 for the downside, while bulls are targeting $180, perhaps $210 by the end of the year or the Jan op-ex.

Looking at the notional gamma of all the options over the next two weeks, I can see in the chart below that $160 also aligns as the TGS (top gamma strike) which is the strike with the highest concentration of gamma for bulls and bears.

$AMD Notional Gamma (2 week look-forward period)

This tells me both sides agree that $160 is a key level. I consider this a ‘sticky' level that price action will tend to gravitate around till a catalyst or flow imbalance arises. Any decent earnings print to the upside or downside should allow AMD to break free from this $160 level. Only a ‘meh' print with no real change/adjustment would lead to AMD staying around $160. I'm leaning towards this scenario only playing out 2 out of 10x's (20% chance) and lean towards a strong push towards $180, or a weakening towards $150, perhaps $140.

I'll share more of our trade ideas live with the Benzinga Option School & Trading Waves members, so make sure you join to see how I'm trading the earnings this week. I hope to see you there.

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