Big Printin’ – AMD, ATVI, WFM

by riskreversal November 22, 2016 4:11 pm • Big Printin'

Here are some apparently directional untied options trades that caught our attention in today’s trading:

AMD: the semiconductor maker is up 200% on the year, and up 400% from its Q1 lows.  At least one trader sees more gains into the year, when the stock was $8.80 shortly after the open, selling to close 29,000 April 7 calls at $2.47 and buying to open 29,000 April 10 calls for $1.09, or $3.1 million in premium. These calls now break-even at $11.09, up 26% from the trading level. $10 certainly looks like a massive long term technical resistance level:

[caption id="attachment_68383" align="aligncenter" width="600"]From Bloomberg From Bloomberg[/caption]

Wall Street analysts have been caught off-sides on the massive run in 2016, with 6 Buy ratings, 13 Holds and 5 Sells with avg 12 month price target of $7, well below where it is trading.

The stock has caught a bid in sympathy with its main competitor, Nvidia (NVDA), which is deemed to be at the forefront of GPU’s for AI machines. But it’s important to note that while AMD screens as cheap on a price to sales metric at less than 2, NVDA at 7x is massively profitable, expected to earn $1.7 billion in net income on their expected $6.7 billion in f2017 sales, while AMD is expected to eek out $4.3 million (with an M) on their expected $4.5 billion in current year sales.

ATVI: Three weeks ago, prior to the company’s Q3 results, we highlighted some bullish options activity (here) that appeared to target a move to the mid $40s by last Friday’s close. Since then the stock of the video game maker has declined nearly 20% in a sharp downtrend.  The chart went from being a hero to a goat, breaking the uptrend that had been in place since the February lows, blowing through technical support at $40 (the early July breakout level to new highs) and quickly approaching the May gap level that should serve as decent technical support at $35:

[caption id="attachment_68381" align="aligncenter" width="600"]ATVI since Jan 2015 from Bloomberg ATVI since Jan 2015 from Bloomberg[/caption]

Today when the stock was $37.20 it appeared a trader rolled down some near term protection, or placed an outright bearish bet, selling to close 3,000 Nov25th weekly 39 puts at 1.81 and bought to open 2500 Nov25th 37.50 puts for 75 cents.

WFM: The stock of the high-end grocery store chain has been stuck in a fairly well defined range for the better part of the last year between $28 on the downside and $35 on the upside, with the stock now just about at the mid point of that range:

[caption id="attachment_68382" align="aligncenter" width="600"]WFM 1yr chart from Bloomberg WFM 1yr chart from Bloomberg[/caption]

It appears that at least one trade is playing for a move back towards the highs by year end. When the stock was $31.24 around noon a trader sold to open 2000 Dec30th 30 puts at 49 cents and bought to open 2000 of the Dec 30th 32 calls for 76 cents, with the bullish risk reversal resulting in a 27 cent debit. This trade breaks-even on the upside at $32.27, with unlimited gains above, loses 27 cents above 30 and the worst case scenario is the stock is 30 or below on Dec 30th expiration and the trader is put 200,000 shares and loses one for one, plus the 27 cent loss, or $54,000.