Call buyers clean up in $AMD

Option traders scored posted huge gains in Advanced Micro Devices today, just two sessions after opening bullish positions in the semiconductor manufacturer.

On Tuesday, Sept. 4, our tracking systems detected three upside trades in AMD options expiring at tomorrow’s close. Investitute co-founder Pete Najarian cited the unusual activity on CNBC’s “Halftime Report” at that time:

—19,300 Weekly $26 calls were bought for $0.33 to $1.05 above open interest of 11,057 contracts.
—18,700 Weekly $26.50 calls were bought for $0.27 to $0.79 above open interest of 4,361 contracts.
—14,000 Weekly $27 calls were bought bought for $0.17 to $0.60 above open interest of 8,248 contracts.

Today the Weekly $26 calls traded for $2.60, more than 3.5 times their average purchase price; the $26.50 calls traded for $2.11, double their average price; and the $27s traded for $1.65, more than 4 times their average. (Investitute updated the $27 calls on the same day they were bought.)

The stock rose 7.94% in the same time frame, underscoring how quickly options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

AMD peaked at $28.58 in midday trading before pulling back to close at $27.84, off 2.35% on the session. This week’s call buying occurred after Jefferies raised its price target on the stock to $30 from $22 and said the company’s new server chip represents a “foundational shift” in competition with arch-rival Intel.