Why AMD Options Traders Are Bearish Long Term

Rate this post
Why AMD Options Traders Are Bearish Long Term

(Please keep in mind that the author of this fundamental study is also a financial writer and portfolio manager.)

Many investors inAdvance Micro DevicesInc. (AMD) are understandably worried about the stock’s short-term decline. The stock has already dropped more than 7% since March 21, when an Investopedia report predicted a drop by mid-April. Long-term AMD investors, on the other hand, may have cause to be even more negative. Options traders predict that the stock will decline another 20% from its present price of roughly $10.55 by January 2019. That is a stunning loss after a 23% collapse from its top this year. (See also: AMD’s Stock Is About to Collapse.)

The optionbets suggest that the stock is projected to fall below $8.50 by the time the options expire on January 18, 2019. It is also not a little wager, with a market value of approximately $25.9 million. The options are not inexpensive however, with AMD’s implied volatility of 53% and a time value of 298 days to expiry.

(Interactive Brokers)

Massive Volatility

The long straddle strategy with a strike price of $10 that expires in January implies that the stock will grow or fall by almost 39% from the strike price. It places the stock in a trading range of $6.10 to $13.90, a large range, and gives the company a 43% downside risk from its present price of roughly $10.50 on March 26. But the put-to-call ratio is the most important factor, with put contracts outnumbering calls by over 3.3 to one, with 169,000 put contracts open interest. With those options trading about $1.50 per contract, the options have a market value of over $25.3 million, compared to just $11.8 million for the calls.

  US-China Trade Friction May Last 20 Years: Jack Ma

Loading Up On Puts

(Trade Alert)

The option volume for puts has been increasing since the beginning of the year, but the most significant activity occurred around the beginning of March, when the options were trading in a price range of $1.17 to $1.25. It informs us that even while the stock was trading in the $11.50 to $12 level, traders were hoping for the price to collapse to $8.75 only for the options to break even.

Technical Chart Is Weak

The technical chart seems stressed as well, and with the stock just going below a major support level around $10.70, the probabilities of the company falling much deeper, potentially to around $9.80, grow. However, it is around $9.80 that the chart becomes fascinating, since if the stock fails at that price, it has a long way to fall to roughly $8.15.

AMD’s stock price has been less than great so far in 2018, and options traders are wagering that its performance will worsen.

Michael Kramer is the Founder and Manager of Mott Capital Management LLC, a registered investment advisor, and the manager of the firm’s actively managed, long-only Thematic Growth Portfolio. Kramer normally purchases and keeps equities for three to five years. Click here to see Kramer’s profile and portfolio holdings. The information offered is only for educational purposes and does not constitute an offer or solicitation to sell or buy any particular stocks, assets, or financial strategies. Unless otherwise specified, investments involve risk and are not guaranteed. Before adopting any of the strategies outlined here, contact with a knowledgeable financial advisor and/or tax expert. The adviser will offer a list of all suggestions made in the previous twelve months upon request. Past performance does not predict future performance.

  8 Factors That Affect Daily Trades

You are looking for information, articles, knowledge about the topic Why AMD Options Traders Are Bearish Long Term on internet, you do not find the information you need! Here are the best content compiled and compiled by the achindutemple.org team, along with other related topics such as: Business.

Similar Posts