AMD Option Trader Betting The Rally Will Resume

Advanced Micro Devices, Inc AMD shares are down about 0.6% in the past week, but at least one large option trader is betting on an AMD bounce in the near future.

The Trade

On Monday morning, Benzinga Pro subscribers received an option alert related to three unusually large AMD put sales.

At 8:54 a.m., a trader sold 599 AMD put options at a $26 strike price that expire on August 16. The calls were sold at the bid price at $1.271 and represent a $76,132 bullish bet. Prior to the large trade, the open interest for the August 16 AMD $26 puts was only 512 contracts.

At 8:56 a.m., a trader sold 1,101 AMD put options at a $27 strike price that expire on August 16. The puts were sold at the bid price at $1.651 and represent a $181,775 bullish bet. Prior to the large trade, the open interest for the August 16 AMD $27 puts was only 791 contracts.

Finally, less than a minute later, a trader sold 1,352 AMD put options at a $28 strike price that expire on August 16. The puts were sold at the bid price at $2.094 and represent a $283,108 bullish bet. Prior to the large trade, the open interest for the August 16 AMD $28 puts was only 698 contracts.

Even traders that focus exclusively on stocks watch the options market closely to gain insight into what options traders may be thinking. Due to the relative complexity of options trading, options traders are often seen as more advanced than the typical stock trader. Many of these options traders are institutions or wealthy individuals that may have a unique take on a company.

Expectations Too Low?

The bullish trading in AMD comes ahead of President Donald Trump’s meeting with Chinese President Xi Jinping at this week’s G-20 summit. AMD derives more than 25% of its total revenue from China sales.

In addition to trade war risks, the trader selling August puts may be anticipating an earnings beat from AMD when it reports on July 24. Expectations for chip makers are extremely low given the weak semiconductor market and disappointing results and guidance from Broadcom Inc AVGO earlier this month.

Unfortunately, it’s impossible to be 100% certain if an option trade is a hedge or not. Stockholders often use call options to hedge against a larger bearish stock position. Given the AMD option trades’ relatively small size, it’s unlikely to be a hedge in this case.

AMD shares traded around $29.26 at time of publication.

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