To The Moon

At CES 2024, $Advanced Micro Devices(AMD)$ unveiled their AMD Radeon RX 7600 XT Graphics Card and expanded its portfolio of desktop and mobile processors. They are also bringing the power of a dedicated AI neural processing unit (NPU) to desktop PC processors for the first time with Ryzen AI to unlock more AI capabilities and improve productivity, efficiency and advanced collaboration. 

This would be good news for developers who are testing models and workloads using mobile computing devices. This is especially useful for smaller organization who are worried about spending large amount of money on processors hardwares.

I have shared how I managed to gain a quick trade upon this news, and I do see potential of AMD reaching a new high after they officially make this available after 31 Jan 2024.

How I Trade AMD and Profit With CES 2024 News and Technical

In this article I would like to share how I would trade AMD using Debit Call options with a short maturity date of 25 days, which is few days after AMD officially making the AI PC chip available.

Advanced Micro Devices (AMD) IV Percentile Rank

AMD implied volatility (IV) is 46.0, which is in the 56% percentile rank. This means that 56% of the time the IV was lower in the last year than the current level.

The current IV (46.0) is 16.8% above its 20 day moving average (39.4) indicating implied volatility is trending higher.

Advanced Micro Devices (AMD) IV vs 20-Day HV

The current IV (46.0) in AMD is 16.0% above its 20 day HV (39.6) suggesting that options markets are predicting future volatility to trade above the most recent 20 day realized volatility.

Advanced Micro Devices (AMD) Volatility Skew

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls. If the implied volatility for downside puts is decreasing relative to upside calls, then that suggests the market is looking to price in positivity for upside move.

The Current Skew Indicator is showing Slightly Bullish

AMD Debit Call Spread: 30-Day Maturity, ATM to +5%

AMD Call Spread Benchmark Index (30-Day Maturity, ATM to +5%) is unchanged today at 2.0% premium to stock price. This value is equal to its 52-week average premium of 2.0%.

The AMD Call Spread Benchmark Index is designed to track the theoretical cost of buying an at-the-money call and selling an out-of-the-money call 5% above the spot price for options with 30 days to maturity.

How I Trade Using Debit Call Spread Strategy

I decided to go for Debit Call spread instead to maximize the gain and also to reduce the risks.

Currently, AMD last price is $149.26, I will be using this contract that expiration date is 25 days away on 02 Feb 2024, I will make one leg to buy a call on the $149 strike for $7.65.

I will add another leg - sell a call at $155 strike for $5.05.

The initial cost of the Debit Call strategy would be $2.60 ($7.65-$5.05). In order for me to make a profit from this strategy, the stock price would need to move higher than $151.60 which is calculated from long strike ($149) plus cost of the spread ($2.60).

My maximum gain would be realized if the stock moves above the $155 strike. Hence, my call spread would be worth $6 and my cost was $2.60 This will net me a profit of $3.40.

Summary

Based on the current skew indicator, AMD is showing potential of a slight bullish upside, hence, I have decided to go for a debit call option which is around 25 days away. This is to be inline with AMD officially launching the PC NPU chip.

I believe AMD should be able to trade above $155 once we enter into the next 2 weeks.

Appreciate if you could share your thoughts in the comment section whether you think AMD will be able to hit $155 after it launch the PC AI chip?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.

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