AMD's Upcoming Earnings Ignite Interest in High-Yield Options Strategies
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Due to the upcoming release of Annual Results for the third quarter for the semiconductor manufacturing company Advanced Micro Devices (AMD, Financial), there is a sense of familiarity regarding the high volatility of Earnings season, more so in the semiconductor industry. Even though such financial reports come with a lot of volatility, the upcoming AMD earnings are, in fact, the perfect chance for option traders, particularly those dealing with short iron condor strategies.
The net credit strategy involving four transactions called the short iron condor is notably appropriate for AMD, especially in the context of the behavior of its prices during the period considered and expectations regarding its further dynamics. This strategy mixes up both bull put spreads and bear call spreads in an effort to make profits in case the share price of AMD stays within a given range by the time of expiration. When analyzing the options chain data obtained recently, one can observe the expectation of around 9.29% movement of AMD's stock price after the earnings release. This has resulted in special maneuvers, which are expected to help exploit this volatility by fixing the options' strike price to take care of the predictability. For example, it could be the 125P/135P for the puts and the 185C/195C for the calls, which offers equal or even lesser exposure to the over-the-counter option but a much greater chance at profit or loss. This type of configuration implies a profitability interval about the optimal prediction for AMD stock, which provides even 30.55 percent more at a much lower risk compared to other configurations of the setup.
The market sentiment regarding AMD is very positive, as evidenced by the consensus rating, which underlines a strong buy standing on several analyses in the past few weeks. This positive outlook, together with the use of options, would enable various traders and investors to have a proper structure in approaching the earnings of AMD since risks of fluctuations in the market are inevitable.
This article first appeared on GuruFocus.