Call Buyers Look for a Heavily Traded Chip Stock to Start Running

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Call Buyers Look for a Heavily Traded Chip Stock to Start Running

Some options traders seem to think one of the market’s most active stocks is ready for a rally.

Advanced Micro Devices (AMD) has barely moved for the last month, but a surge of volume yesterday looked for a rally by the end of this week.

Traders amassed more than 320,000 calls expiring on September 27. The 27-September 32s changed hands more than 200,000 times, making them the busiest contract in the entire market.

Others, including the 27-September 31 calls, the 27-September 30.50s, the 27-September 31.50 calls and the 27-September 30s, saw heavy activity. They all traded more contracts than previous open interest, which indicates new positions were opened.

Calls fix the price where investors can purchase a stock. They can appreciate quickly when shares rally but also expire worthless when no move occurs. The timing of Monday’s activity suggests buyers may expect a rally in the very near term. (See our Knowledge Center.)

Advanced Micro Devices (AMD) chart with call volume and Bollinger Bands.
Advanced Micro Devices (AMD) chart with call volume and Bollinger Bands.

AMD rose 1.96 percent to $30.64 yesterday. It hit a 13-year high last month on news Alphabet (GOOGL) and Twitter (TWTR) would use its news data-center chips, but has traded in an increasingly tight range since.

Did you know AMD is also one of the most active names in the entire market? It averages more than 60 million shares and over 200,000 options contracts per session. That places it among companies like Bank of America (BAC) and Apple (AAPL), which have 8-30 times the market capitalization.

While AMD’s usually heavily traded, yesterday’s activity really stood out because more than two-thirds of the volume was concentrated in the super short-term expiration. Calls also outnumbered puts by more than 5 to 1, compared with the typical 2-to-1 proportion.

Hotlists showing most AMD calls as most active in yesterday's session.
Hotlists showing most AMD calls as most active in yesterday’s session.
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