Overview
Advanced Micro Devices (AMD) just released its earnings report, posting a 24% YoY revenue increase to $7.66 billion, slightly surpassing expectations. Despite solid numbers, the stock dropped over 8%, reflecting concerns about data center revenue shortfalls and competition in the AI space. With the stock now trading at $110.74, this presents an opportunity for an income-generating options play: selling a cash-secured put.
The Trade: Selling the $105 Put Expiring March 7, 2025
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Sell AMD 105 Put (March 7, 2025 Expiration)
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Bid Price: $2.51
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Collateral Required: $10,500 per contract
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Premium Collected: $251 per contract
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Implied Volatility (IV): 38.28%
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Delta: -0.3197 (indicating a ~32% probability of assignment)
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Theta (Time Decay Benefit): -0.0727 (steady premium erosion benefits the seller)
Why This Trade?
1. Strong Support at $105
Technical levels show $105 as a key support zone, increasing the likelihood that the stock stabilizes or bounces. If AMD stays above this level, you keep the full $251 premium with no obligation to buy shares. If it dips below, you acquire shares at an effective cost of $102.49 ($105 strike - $2.51 premium), a 7.4% discount from today’s price.
2. Elevated Implied Volatility = Higher Premiums
With AMD’s post-earnings volatility still elevated, put premiums are richer than usual, making it an ideal time to collect income from option selling.
3. Favorable Time Decay (Theta)
Since theta decay works against option buyers, time erosion steadily benefits the seller. If AMD holds steady or rises, the put loses value, allowing for an early exit with profits.
Risk-Reward Analysis
✅ Best Case: AMD remains above $105, and you keep the full $251 premium (100% profit).
✅ Neutral Case: AMD trades near $105, and you close the position early for a partial gain.
⚠️ Worst Case: AMD drops below $105, and you are assigned shares at $102.49—still a solid entry for long-term investors.
Trade Management
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Profit Target: Close early if premium decays by 50% (~$1.25), locking in gains before expiration.
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Rolling Strategy: If AMD weakens, consider rolling down and out to a later expiration at a lower strike to collect more premium.
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Assignment Plan: Be prepared to buy 100 shares per contract at $105 if the stock is assigned.
Final Thoughts
This cash-secured put is a great way to either generate passive income or acquire AMD shares at a discount. Given the post-earnings volatility and technical setup, this trade aligns well with a swing trader’s strategy, leveraging short-term fluctuations for a solid premium return.
Let me know if you'd like any refinements or alternative plays!
AMD