U.S. markets open in 2 hours 45 minutes
  • S&P Futures

    4,170.00
    -6.25 (-0.15%)
     
  • Dow Futures

    34,012.00
    -69.00 (-0.20%)
     
  • Nasdaq Futures

    14,018.50
    -11.00 (-0.08%)
     
  • Russell 2000 Futures

    2,244.90
    -14.10 (-0.62%)
     
  • Crude Oil

    63.12
    -0.01 (-0.02%)
     
  • Gold

    1,789.50
    +9.30 (+0.52%)
     
  • Silver

    26.23
    +0.12 (+0.48%)
     
  • EUR/USD

    1.2045
    +0.0065 (+0.54%)
     
  • 10-Yr Bond

    1.5730
    0.0000 (0.00%)
     
  • Vix

    17.08
    +0.51 (+3.08%)
     
  • GBP/USD

    1.3896
    +0.0056 (+0.40%)
     
  • USD/JPY

    108.1400
    -0.6430 (-0.59%)
     
  • BTC-USD

    56,394.14
    +1,835.24 (+3.36%)
     
  • CMC Crypto 200

    1,278.81
    -112.90 (-8.11%)
     
  • FTSE 100

    7,036.63
    +17.10 (+0.24%)
     
  • Nikkei 225

    29,685.37
    +2.00 (+0.01%)
     

Understanding Advanced Micro Devices's Unusual Options Activity

  • Oops!
    Something went wrong.
    Please try again later.
Benzinga Insights
·2 min read
  • Oops!
    Something went wrong.
    Please try again later.

Advanced Micro Devices (NASDAQ:AMD) shares experienced unusual options activity on Friday. The stock price moved down to $82.42 following the option alert.

  • Sentiment: BULLISH

  • Option Type: SWEEP

  • Trade Type: PUT

  • Expiration Date: 2021-03-05

  • Strike Price: $85.00

  • Volume: 172

  • Open Interest: 5981

Three Ways Options Activity Is ‘Unusual'

One way options market activity can be considered unusual is when volume is exceptionally higher than its historical average. The volume of options activity refers to the number of contracts traded over a given time period. The number of contracts that have been traded, but not yet closed by either counterparty, is called open interest. A contract cannot be considered closed until there exists both a buyer and seller for it.

Another sign of unusual activity is the trading of a contract with an expiration date in the distant future. Usually, additional time until a contract expires allows more opportunity for it to reach its strike price and grow its time value. Time value is important to consider because it represents the difference between the strike price and the value of the underlying asset.

"Out of the money" contracts are unusual because they are purchased with a strike price far from the underlying asset price. "Out of the money" occurs when the underlying price is under the strike price on a call option, or above the strike price on a put option. Buyers and sellers try to take advantage of a large profit margin in these instances because they are expecting the value of the underlying asset to change dramatically in the future.

Bullish And Bearish Sentiments

Options are "bullish" when a call is purchased at/near ask price or a put is sold at/near bid price. Options are "bearish" when a call is sold at/near bid price or a put is bought at/near ask price.

These observations are made without knowing the investor's true intent by purchasing these options contracts. The activity is suggestive of these strategies, but an observer cannot be sure if a bettor is playing the contract outright or if the options bettor is hedging a large underlying position in common stock. For the latter case, bullish options activity may be less meaningful than the exposure a large investor has on their short position in common stock.

Using These Options Strategies

Unusual options activity is an advantageous strategy that may greatly reward an investor if they are highly skilled, but for the less experienced trader, it should remain as another tool to make an educated investment decision while taking other observations into account.

For more information to understand options alerts, visit https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts

See more from Benzinga

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.