AMD Analysis

Advanced Micro Devices Inc. (AMD)

Update 5/8/2017: AMD gapped dramatically to the downside after earnings were published and never returned to profitability. I exited as options expiration neared.

Shares declined by 25.5% over seven days, mostly on the first day of the period, for a -1,330% annual rate. The options position produced a -100.0% loss on debit for a -5,214% annual rate.

AMD publishes earnings on Monday after the closing bell.

I shall use the series of weekly options that trade for the last time 11 days hence, on May 12.

Implied volatility stands at 64%, which is 6.4 times the VIX, a measure of the volatility of the S&P 500 index.

AMD’s IV stands in the 44th percentile of its annual range and the 51st percentile of its most recent broad movement.

The price used for analysis was $13.57.

Premium: $1.25 Expire OTM  
AMD-iron fly Strike Odds Delta
Long 16.50 92.4% 10
Break-even 14.75
Short 13.50 51.1% 54
Short 13.50 46.8% 46
Break-even 12.75
Long 11.50 86.4% 11

The premium is 50% of the width of the position’s wings.

The risk/reward ratio is 1.4:1.

Decision for My Account

I have entered a position on AMD as described above. The stock at the time of entry was priced at $13.58.

By Tim Bovee, Portland, Oregon, May 1, 2017

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