AMD shares are popping amid unconfirmed takeover chatter and potential short covering
Shares of
Advanced Micro Devices, Inc. (NASDAQ:AMD) are trading up 5.4% today at $13.39 -- the best stock on the S&P 500 Index (SPX) at last check. While some are crediting the surge to unconfirmed takeover chatter, others are speculating on a possible short squeeze -- in addition to the company's newly released embedded graphics processing unit (
GPU). Whatever the reason, call volume is soaring in AMD stock's options pits, with traders betting on more upside by week's end.
Most recently, 156,716 calls had changed hands on AMD -- more than two times the expected intraday rate -- compared to 46,109 puts. The weekly 10/6 13- and 13.50-strike calls are most active, where a collective 39,272 contracts have traded. It looks as if new positions are being purchased, a theory echoed by
Trade-Alert, meaning speculators expect AMD shares to extend today's upside through expiration at this Friday's close.
Looking at the charts, Advanced Micro Devices hasn't settled a week north of $13.50 since late July -- the same week the stock topped out at a 10-year high of $15.65. However, AMD's 200-day moving average has faithfully served as support during this recent pullback, and data from Schaeffer's Senior Quantitative Analyst Rocky White suggests this has historically bullish implications.
Specifically, in the three other times AMD shares have come within one standard deviation of this trendline after spending a lengthy time above it in the past three years, they've gone on to average a 21-day gain of 4.41%, and have been positive 75% of the time. Based on the stock's current perch, this would put AMD in the vicinity of $13.91 -- territory the equity last charted following news of a potential
Tesla partnership.
With all this in mind, it's possible that some of the buying activity at the out-of-the-money weekly 10/6 13.50-strike call is actually at the hands of short sellers guarding their bearish bets against any additional near-term risk. Short interest on AMD stock jumped 6.08% in the latest reporting period to 158.11 million shares -- 18.88% of the stock's float, and just off the June 1 multi-year peak of 158.59 million shares.