Large AMD Option Traders Betting On Q3 Earnings Beat

Advanced Micro Devices, Inc. AMD traded lower by 1.3% on Thursday but remains up by 57.8% year-to-date as the company continues to outperform Intel Corporation INTC in the CPU market.

Several large option traders were aggressively betting on AMD Thursday morning, suggesting AMD could be primed for a bounce following its recent pullback.

The Trades

On Thursday, Benzinga Pro subscribers received seven option alerts related to unusually large trades of AMD options. The following are a handful of the largest. 

• At 10:01 a.m., a trader bought 2,989 AMD call options with a $30 strike price expiring Nov. 17. The series of three trades were executed at or near ask prices ranging from $2.16 to $2.194 and represented a more than $650,000 bullish bet.
• Within 2 minutes, likely the same trader bought another 11,245 of the same AMD call options with a $30 strike price expiring Nov. 15 at the ask price of $2.221. The trade represented nearly an additional $2.5-million bullish bet.
• At 11:06 a.m., a trader sold 2,000 AMD put options with a $28 strike price expiring on Jan. 17, 2020 at the bid price of $2.541. The trade represented a $508,200 bullish bet.
• At 11:49 a.m., a trader bought another 607 AMD call options with a $30 strike price expiring Nov. 15 at the ask price of $2.154. The trade represented a $130,747 bullish bet.

Of the seven total large AMD option trades Wednesday morning, six were calls purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish.

The remaining trade consisted of calls sold at the bid, a trade typically seen as bearish. The six largest AMD trades of the morning were all bullish.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge.

In this case, given the relatively large size of the largest AMD trades and the fact that they were executed in such rapid succession, they could easily be institutions hedging against large short positions in AMD stock.

AMD Headed Higher?

The large option trades in AMD come as the company continues to chip away at Intel’s CPU market share. AMD’s share of the CPU market has nearly doubled to 17.1% over the past three years, according to Mercury Research.

AMD’s latest family of Ryzen processors were released over the summer, and their sales numbers will start being reflected in AMD’s third-quarter earnings report in late October.

AMD traders are also watching trade war developments closely given the company derives more than 25% of its revenue from China.

Benzinga’s Take

The first four largest trades specifically mentioned above totaled more than $3.1 million in combined call positions in AMD.

The timing suggests all four trades came from the same trader. The fact that the large trader specifically chose November calls rather than October calls suggests the position is almost certainly a play on AMD’s third-quarter earnings numbers and guidance.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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