AMD's 9% Jump Boosts Appeal of Call Options Amid Brightening Outlook: Options Chatter

The stock of Nvidia’s rival rose after the company outlined a path to drive a more than 35% revenue compound annual growth rate (CAGR) over the next three to five years, an adjusted operating margin of more than 35% and adjusted earnings per share exceeding $20.

AMD sees revenue growth accelerating from 14% in 2024, adjusted operating margin expanding from about 24% and adjusted earnings climbing from $3.31 last year.  

Call options that give their holder the right to buy AMD shares saw more than 112,000 contracts change hands. That’s more than double yesterday’s total volume of 424,340 call options and up significantly from the 20-day average of 520,363 contracts.

“We’re impressed with AMD’s growth targets for its various segments, and we don’t dispute that the company has opportunities to gain market share in each of its core end markets,” Morningstar analyst Brian Colello wrote in a note to clients yesterday.

Call options that give their holder the right to buy the shares at $260 in two days attracted the heaviest trading among contracts tied to AMD as the rally bolstered the odds that they will be in the money they expire Friday afternoon.

The stock closed at $258.89, less than $3 below  that strike price. Volume on those $260 call options more than tripled to 112,040 contracts, from yesterday’s close of 32,160 contracts. That’s already more than twice the open interest of 32,160 contracts.

Morningstar’s Collelo thinks the company’s target of capturing a 10% market share is “plausible if we factor in AMD’s target server CPU market share of 50%.  

While the  Morningstar analyst raised his price target on the stock to $270, from $210, that target is just more than $10 above the current price.

“We continue to view all these forecasts as uncertain, as the AI landscape continues to evolve rapidly,” Collelo said. “However, we’re pleased to receive insight that AMD’s TAM and market share forecasts were based on bottom-up forecasts and discussions with customers, rather than top-down approximations,” he said, referring to the total addressable market.