To The Moon

We saw $Advanced Micro Devices(AMD)$ share price gained more than 23% at the market close on Monday (06 Oct) after AMD and OpenAI announce strategic partnership to deploy 6 gigawatts of AMD GPUs.

As a long-term shareholder of AMD, I am now contemplating whether to take partial profit gains, or shall I make option trade to capture this upside catalyst by OpenAI, so in this article, I would like to share my thoughts.

What just happened, and what’s the risk / opportunity?

The news & bullish narrative

AMD announced a multi-year GPU / AI chip supply deal with OpenAI, covering up to 6 GW of compute deployment over time, beginning in 2026.

As part of the deal, OpenAI gets warrants to acquire up to ~160 million AMD shares (≈ 10 % of AMD, by share count) at a very low strike (e.g. $0.01) under milestone / vesting conditions tied to deployments and share price targets.

The market reacted strongly, with AMD shares jumping 20–30 % or more on that announcement.

So the narrative is that AMD has gained a marquee partnership, credibility in AI compute, and optional upside via the warrants. Many analysts have upgraded their views on AMD as a result.

Risks, caveats & challenges

Timing mismatch: The actual chip deliveries and revenue recognition mostly start 2026 and beyond. The stock reaction is largely based on expectations and optionality, not current earnings.

Execution risk: Scaling GPU production, meeting technical performance, securing further customers beyond OpenAI, and competition from Nvidia / others are nontrivial challenges.

Valuation already rich: A large stock move on hype means that much of the “good news” may already be priced in. Chasing now may give limited upside relative to downside risk.

Dependence on milestones: The warrants / optional share issuance are contingent on performance, with vesting and share price triggers. Those may or may not all be achieved.

Thus, while the deal is compelling, it is not a slam dunk — and buyers now bear the risk that the story does not fully deliver.

What should an existing investor consider doing?

Since I already own AMD shares, here are possible paths to manage our position or to “play” for further upside:

Take partial profits / scale back exposure

It is reasonable after such a strong run to reduce some exposure — e.g. sell 20-30 % to lock in gains — while retaining a core position for further upside.

Let it ride while hedging / protecting downside

Keep most of the position but use derivatives as insurance (puts, collars, spreads) in case the story disappoints or markets rotate away from “AI hype.”

Aggressively lean into optionality (with limited capital)

If our conviction is high, you might allocate a smaller “option‐play” bet to capture more upside, rather than increasing outright stock exposure.

Rebalance around catalysts

Identify upcoming milestones or earnings / guidance events (e.g. AMD’s revenue updates, GPU rollout timelines, OpenAI deployment news) and trade around those.

Using options: can one capture upside via a bull put spread on AMD?

I personally think that a bull put spread (aka “put credit spread”) is one way to gain from upside or neutral view while limiting downside risk.

Here Is The Idea That I Have

• Sell a put at a strike close to, but below, current price (you collect premium)

• Buy a put at a lower strike (to cap maximum loss)

This gives us net credit if AMD stays above the sold put strike. The max risk is the difference in strikes minus the premium collected.

But we need to also consider the pros and cons that comes with a bull put spread

Pros & cons of a bull put spread in this context

Pros:

• We receive premium income upfront.

• Our downside risk is limited by the long put.

• We profit if AMD stays above the sold put — which is consistent with a moderately bullish or neutral view.

• We do not need to buy calls (which may be expensive) or stake as much capital.

Cons / risks:

• If AMD falls sharply (e.g. market shock or negative surprise), we may incur losses (though capped).

• We cap our upside — we would not fully benefit from large upward moves beyond the strike difference.

• Time decay works in our favor only so long as the stock remains above our short put.

• We must choose the right strikes, expirations, and margin carefully.

Here Are Some Things That I Think We Should Check Before Executing The Option Trade

• Option liquidity, bid-ask spreads

• Implied volatility levels

• Greeks (theta, vega) to understand how your spread is impacted by time decay and volatility changes

• Margin requirements / capital at risk

• Upcoming earnings, catalysts, and macro headwinds (rates, semiconductor cycles, general tech rotation)

When to chase vs. take profits?

If we missed the initial move, chasing now is riskier because much of the upside may already be priced in. The next upside leg may depend on strong confirmatory news or execution.

But if we still have conviction and limited capital, a small bet via the bull put spread (or even LEAP calls with limited exposure) might be more prudent than loading up.

Since I already have a position, taking partial profits is quite reasonable to de-risk the “free ride” effect — I can leave a position on with a hedge.

In the next section, this is what I would be considering for the bull-put-spread for my risk profiles. I tried to compute the maths so that we can see the credit, max loss, breakeven and return on risk.

I also will be sharing the key risks and execution notes.

Why The Options Market Is Active

OpenAI’s AMD deal is the catalyst that caused the big move and very high option activity today. That is why implied vols and premiums are elevated — which makes credit spreads attractive but also riskier if the stock gaps.

AMD Implied Volatility

AMD implied volatility (IV) is 62.4, which is in the 96% percentile rank. This means that 96% of the time the IV was lower in the last year than the current level. The current IV (62.4) is 41.3% above its 20 day moving average (44.2) indicating implied volatility is trending higher.

Aggressive / Carry-Heavy (Higher Chance Of Assignment; Bigger Credit)

Sell 200P / Buy 180P (width = $20) - Expiration Date: 20 Feb 2026

Premiums (last): short 200P = 23.75; long 180P = 14.10

Net credit = 23.75 − 14.10 = $9.65 → $965 per spread.

Max loss = 20.00 − 9.65 = $10.35 → $1,035 per spread.

Breakeven = 200 − 9.65 = $190.35.

Return = 965 / 1,035 ≈ 93.24% (high reward/risk because we are selling a put that is near/at the money — big premium).

Why use it: pulls in the largest credit and lowest theoretical max loss, but selling a 200P when stock is ~$204 means we are short a near-ATM put → high chance of assignment or needing to manage/roll if AMD moves down even modestly.

Important: those return percentages look very attractive because implied volatility and option last prices spiked after the OpenAI news. The market is pricing in big moves and that inflates premium.

That also means risk if the underlying gaps against us (IV can fall quickly, and assignment risk for spreads with short puts close to ATM is material).

Execution & risk notes

Check live bid / ask and size — last trade is not what we can execute; use mid or the posted bid/ask and consider spread.

Liquidity / slippage — pick strikes with decent open interest and tight bid/ask (check the Open Interest).

Implied volatility — IV likely jumped; if IV drops fast (good news), our short put price may fall (good) but if the market gap lower, we lose. High IV creates big premium but also larger move risk.

Position size — size each spread so max loss is a small percentage of our trading capital. Example: if we are willing to risk $5k, we could buy ~4–9 of these spreads depending on max loss.

Assignment / early exercise — short puts (especially near-ATM) carry assignment risk. If assigned, we will be long 100 shares per short put at the strike. Plan for capital or have a plan to roll/close.

Rolling plan — set rules: roll down and out if stock closes below short strike a few days before expiry, or close if spread hits a set % max loss.

Taxes & commissions — factor in commissions / fees and tax treatment for options in our region.

Summary

The OpenAI-AMD partnership is a "transformative" multi-year, multi-generational agreement for OpenAI to deploy up to 6 gigawatts of AMD Instinct GPUs, starting with the MI450 series in late 2026. This deal, which AMD expects to generate tens of billions of dollars in revenue, caused AMD shares to surge over 30%, adding billions to its market capitalization and positioning it as a stronger competitor to Nvidia.

For investors, the massive surge warrants caution. While analysts view the deal as a major validation of AMD's AI strategy, some advise against chasing the stock at current high levels, pointing to execution risk in delivering on the massive scale.

Taking partial profit gains could be a strategy after such a steep rally. Existing investors might consider options trading (like buying calls or selling cash-secured puts) to capture further potential upside or generate income, but they must be aware of the high volatility and potential for a late-stage rally reversal. The partnership's unique structure, including an option for OpenAI to acquire a nearly 10% stake via performance-based warrants, deeply aligns the companies' long-term interests.

The option that I planned to take is because I want the highest income and are OK taking assignment risk but also be ready to be assigned or to close/roll if AMD falls.

Appreciate if you could share your thoughts in the comment section whether you think taking partial profit gains and play option trades to capture the upside movement catalysed by OpenAI pick.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger 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.