Call Options Hot as Micron, AMD Stocks Rally

By Josh Selway / June 07, 2017 / www.schaeffersresearch.com / Article Link

The VanEck Vectors Semiconductors ETF (SMH) has put in the best year-over-year performance of all the exchange-traded funds (ETF) we track here at Schaeffer's, rising roughly 52%. In fact, the fund earlier today hit a record high of $88.17, and was last seen 0.6% higher at $87.80. Two of the most notable stocks inside the ETF are Apple suppliers Micron Technology, Inc. (NASDAQ:MU) and Advanced Micro Devices, Inc. (NASDAQ:AMD) -- both of which are seeing heavy options trading today. Below, we'll take a closer look at the options data on MU and AMD stocks.

MU Stock Hits Fresh Highs

Micron call volume is on track to settle in the 95th percentile of its annual range, with 105,878 contracts traded, or roughly two times the expected pace. Buy-to-open activity seems likely at the weekly 6/9 31.50-, 32.50-, and 33-strike calls, which are three of the most popular options today. If this is the case, options traders are betting on extended upside for MU stock through the end of this week, when the contracts expire.

It seems to be a good time to buy Micron options, too. For starters, the shares have a Schaeffer's Volatility Index (SVI) of 34%, which ranks in the low 14th annual percentile, revealing low volatility expectations are being priced into near-term options. Plus, MU stock has a Schaeffer's Volatility Scorecard (SVS) of 84, indicating it's tended to make bigger-than-expected moves on the charts over the past year, compared to what options traders have priced in.

Of course, it's hard to blame anyone for being bullish on Micron. The stock is up 1.9% today at $32.18, and earlier hit a two-year high of $32.53. As such, MU shares now sport a year-over-year gain of 158%.

Calls Traders Stay After AMD Stock

Call traders are also rushing AMD stock today, with its single-day put/call volume ratio of 0.30 on pace to settle in the bottom one-fifth of readings from the past year. Moreover, calls are trading at three times the expected pace -- with 311,432 on the tape -- and options traders have taken a heavy interest in the weekly 6/9 12.50 and 13 strikes. These are the most popular contracts so far today, and it looks as if buy-to-open activity is happening at both. If this is the case, options traders are expecting short-term upside for Advanced Micro Devices stock.

This preference for calls is not unusual. In fact, call buying has tripled put buying during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Meanwhile, AMD also has an attractive SVI, with its reading of 54% landing in the low 17th annual percentile. Not only that, but the stock's SVS stands at 98.

AMD stock has had a big year on the charts. While the shares have pulled back since their multi-year high of $15.55 from late February, they're up 3% today at $12.39. At this time last year, Advanced Micro was trading below $5.

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