AMD Analysis

Advanced Micro Devices Inc. (AMD)

Update Oct. 2, 2018: I exited AMD for a $1.74 profit on the options, with shares trading at $30.21 at exit, The exit price was within the profit zone, 21 cents away from the short calls strike price.

Implied volatility at exit was 74%, two points above its level at entry.

I exited at 77.6% of maximum potential profit, well above my target of 50% of max.

Shares rose by 6.1% over 26 days, or an 86% annual rate. The options position produced a 345.5% return for a +4,85-% annual rate.

I have entered a short iron condor on AMD, using options that trade for the last time 29 days hence, on Oct. 5. The premium is a $0.98 credit and the stock at the time of entry was priced at $28.48.

I made the decision to enter the trade in my account based on a high implied volatility rank and a trending counter to the broad markets.

The profit zone for this position is between $32.98 on the upside and $25.48 on the downside.

Implied volatility stands at 72%, which is 4.8 times the VIX, a measure of the volatility of the S&P 500 index.

AMD’s IV stands at its peak for the past year, after elimination of an outlier.

The price used for analysis was $27.95.

Premium: $0.98 Expire OTM
AMD-iron condor Strike Odds Delta
Long 34.00 84.1% 21
Break-even 32.98 80.4% 25.5
Short 32.00 76.7% 30
Short 26.50 59.4% 33
Break-even 25.48 66.8% 26.5
Long 24.50 74.1% 20

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1:1.

The bid/ask spread was 17.7%.

By Tim Bovee, Portland, Oregon, Sept. 6, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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