Advanced Micro Devices Inc. (NASDAQ: AMD) was last seen trading up about 10% at $5.76 in Friday’s early post-earnings indications. Its prior 52-week high was $5.57. AMD was reiterated as Buy at Jefferies, and the target price was raised to $6.75 from $5.50. Credit Suisse has an Underperform rating but raised its price target to $5.50 from $3.50. http://247wallst.com/investing/2016...-pandora-starbucks-twitter-att-and-many-more/
The volatility that was baked into the options price yesterday was the earnings. No more volatility premium.
It is always good to learn something new, as I have noticed that my JUL 22 $6 option is down this morning.
It appears that the profit taking is stronger than it should be. Something has caused a sell off/short selling from the highs
So where does AMD go from here? Close today near the open price, or close today near the highest close from earlier this week at $5.51?
I think most of the profit takers from ER have probably stepped out already, not sure how many people still want in today though as they can probably wait for a pull-back later. Unless they think that already happened when it just dipped to $5.50.
The point is AMD had a good earning report and should trend up from here with the normal bumps in the road. For those of us holding shares it should be a good ride. Calls can be risky near expiration that is why 80% of my calls are a long term. As the markets are coming back so is AMD
TTT, learned my lesson on the call option that nears the expiration, fortunately overall still making a good profit on AMD. Thank you again for all of your valuable top picks, those have made me some $$$ ever since I have joined this forum.
Your most welcome leonx81! I wanted to say something when you bought the July 22 calls but of course it was too late. Most of us were anxious to buy the calls on upbeat DD but it would have been safer to buy them further out. My Jan 20 2017 $5.50's and $7 calls are through the roof from my first buys.If you check the beginning of this thread I bought them when AMD was trading in the mid two's. There are always lessons to be learned for all of us
Yeah, I'm only following this thread due to TTT's insight. Great stuff! I had some July 26 $6.00 calls that I sold for profit and I'm holding some Jan '17 $4.50 calls that I bough back in the 3's. That said, it's worth it to read up a bit on options. I was on my phone before, so I couldn't really get into the reason you saw deflation after the first hour of trading. Simplistically, an option has an intrinsic value, a time value, and an implied volatility (IV) value. If you're paying $0.09 for a $6.00 strike when the stock is @ $5.20 (yesterday), your intrinsic value is ($0.80). You're buying something for $0.89 or the option wouldn't cost you $0.09, right? It's hard to separate time value and IV, most people just call it the 'option premium'. Option Premium = Option Price - Intrinsic Value, so as you can see a lot of 'stuff' gets lumped in the 'option premium' moniker. However, you need to know what you're paying for. In the above-mentioned $0.89 option premium, there's time value. How much is this? I don't know, but it's definitely not much because the option expires in a week. What else was there? Earnings = volatility = IV. People were selling their options at a premium to it's 'book value' because maybe, just maybe, if the earnings were good, the stock would blow up 10%. So that's what you bought. Implied Volatility. But you need to sell that option after the pop but before the slowdown (if you believe one is coming), because as we can see from the current chart, there's not much volatility left in AMD for today. Therefore, nobody is willing to pay the IV cost today that you did yesterday. We know what happened, we know where AMD now sits. Therefore, your option is back to 'book value', Option = Intrinsic Value + Time value. Option = $0.10 = ($0.27) intrinsic + $0.37 premium, which is probably just time value at this point. I know it's simplified, but I hope it helps you understand what you were seeing in your option values this morning.
@Jeff240sx, thank you for the helpful tutorial on options and I will "digest" this over the weekend. Have a good weekend everyone!
AMD making another run. If it breaks 5.85 that is being stubborn to take out it could near $6 Broke 5.85 as I was typing
