Unusually Large AMD Option Trades Suggest Stock Could Be Headed Even Higher

Semiconductor stocks have carried out well in 2020. Nevertheless, Advanced Micro Gadgets, Inc. ( NASDAQ: AMD) has been among the most popular stocks in the market due to its exposure to video gaming and the repeated stumbles of leading rival Intel Corporation ( NASDAQ: INTC).

On Tuesday, large alternative traders were making some huge bets that AMD’s 90% rally off the March lows is far from over.

The Trades: On Tuesday, Benzinga Pro subscribers got 28 choice signals associated with unusually large trades of AMD alternatives. Here is a handful of the biggest:

• At 9:39 a.m., a trader purchased 334 AMD call alternatives with an $85 strike price ending on March 19, 2021, near the asking price at $12.68. The trade represented a $423,512 bullish bet.
• At 10:39 a.m., a trader purchased 500 AMD call choices with a $55 strike rate ending on Oct. 16 at the asking rate of $26. The trade represented a $1.3 million bullish bet.
• At 10:47 a.m., a trader offered 373 AMD put alternatives with an $80 strike rate ending on Jan. 15, 2021 near the quoted price at $12.201. The trade represented a $455,097 bullish bet.
• At 11:47 a.m., a trader purchased 711 AMD call choices with an $80 strike cost ending on Oct. 16 at the asking cost of $7.39. The trade represented a $525,429 bullish bet.

Of the 28 total big AMD choice trades on Tuesday early morning, 21 were calls acquired at or near the ask or puts sold at or near the bid, trades typically viewed as bullish. 7 trades represented calls cost or near the bid or puts bought at or near the ask, trades normally seen as bearish. The 5 biggest trades of the early morning were all bullish in nature.

Why It’s Important: Even traders who stick solely to stocks frequently keep an eye on choice market activity closely for unusually big trades. Provided the relative intricacy of the choices market, large alternatives traders are usually considered to be more advanced than the average stock trader.

Much of these big choices traders are rich people or institutions who might have unique details or theses associated with the underlying stock.

Unfortunately, stock traders frequently use the options market to hedge against their bigger stock positions, and there’s no proven way to determine if an options trade is a standalone position or a hedge. In this case, provided the fairly big sizes of the biggest options trades, they might certainly represent institutional hedging.

AMD On The Path To $100? AMD reported 26% profits growth in the 2nd quarter, the very same quarter Intel said it discovered a flaw in its 7-nanometer chip production procedure and may be forced to depend on third-party manufacturing. Intel has actually lagged AMD in GPU innovation for the past numerous years, enabling AMD to consume into its leading market share.

On Monday, Jefferies repeated its Buy ranking for AMD and raised its rate target from $95 to $135, suggesting another 69% upside from current levels.

“As it does, we think that the bull case for AMD, which is based mainly on AMD recording 30% share from INTC over the next 2-to-3 years, will morph to a 50% market share bull case 4-to-5 years out,” analyst Mark Lipacis stated.

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Benzinga’s Take: Tuesday’s large alternative trading was heavily manipulated to the bullish side, recommending deep-pocketed traders are expecting more excellent news from AMD and possibly problem from Intel in the coming months. The $1.3 million call purchase has a break-even cost of $81, suggesting at least 2.5% benefit for the stock over the next 2 months.