In Technical Analysis

NASDAQ:AMD Could Pop 20% This Year: Advanced Micro Devices Inc. (NASDAQ:AMD) shares look to be preparing for a big move higher, according to, with investors wagering that  shares can rise by up to 21% in the coming months. Looking at options, the market shows that options set to expire on January 19 with the $14 strike price suggest shares could rise to nearly $17 by expiration. The call to put option ratio is around 2.5 to 1.

AMD Stock (NASDAQ:AMD) has risen nearly 22 percent so far in 2017, outpacing the S&P 500 by almost eight percentage points. However, that increase has been anything but smooth and steady, with shares trading in a range of nearly 40 percent over the course of the year. That is a wide range of volatility. Due to this, the options are cheap, reflecting an implied volatility of just over 51 percent.

Massive Volatility

Implied volatility is high for AMD (NASDAQ:AMD), at 51%. In comparison, the S&P 500 has an implied volatility of only 9%, however it is worth noting there has been subdued volatility in the recent months. AMD’s implied volatility suggests just a one standard deviation move could send the stock soaring or crashing 27%.

Price Rise

The long straddle strategy using the $14 strike price – an options strategy that involves buying a put and a call – suggests that AMD (NASDAQ:AMD) can trade within a range of $11 to $17 a share by the time the January 19 expiration comes around. The trading range comes from the premium being paid to buy one call and one put, which is a 21 percent rise or fall from the current stock price of $13.75.

The call options are favoured, with nearly 33,000 contracts of open interest, whilst puts only have an open interest of roughly 13,000 contracts. The $15 strike price calls have 122,000 contracts of open interest, whist the stock would need to trade at about $16 to break even. This is because calls trade at about $1, and there only 24,000 contracts open on the puts. The $13 strike price is almost even regarding the number of puts to calls, with the puts at around 25,000 contracts.


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