Ride Red-Hot Advanced Micro Devices, Inc. (AMD) Stock for Free

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Advanced Micro Devices, Inc. (NASDAQ:AMD) is on a monster run of late. The long trade on AMD stock has been absurdly easy, especially when using options. I’ve even had success shorting the company recently, but only because I booked my profits quickly.

Ride Red-Hot Advanced Micro Devices, Inc. (AMD) Stock for Free

Last year conditioned me to not overstay my welcome in winning trades.

After extended rallies, I am usually tempted to initiate short trades rather than long ones. Today, I will go against my instinct, though, and go long in AMD stock to capture a potential move (unthinkably) higher.

Advanced Micro Devices’ fundamentals haven’t really changed in recent months. We’re in a digital world and becoming even more reliant on tech. AMD is one of few who are the major suppliers to the brains of this tech world. This tells me that there is room for all — like rivals Intel Corporation (NASDAQ:INTC) and Nvidia Corporation (NASDAQ:NVDA) to prosper. So I don’t want to short anything just for the sake of shorting.

AMD stock chart view 1
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Furthermore, I see things I like in AMD’s stock chart. The price action has been constructive. I see higher lows challenging necklines that if broken upwards can invite even more buyers.

I’m not usually one to chase a stock long on a 6%-plus day like what AMD stock is putting out on Tuesday. But the options market makes this fairly easy while leaving room for error.

How to Trade AMD Stock Now

The bet: Sell AMD Oct $9 put for 60 cents per contract. By selling this put, I am committing to owning AMD shares at the strike sold. So I only do this if I am willing and able to own the stock at that price. I can even buy sacrifice Apr $9 puts for 4 cents to cover the crash scenario should it come.

Usually I like to sell opposite risk to balance my trade, but in this case, I will refrain. In fact, I’ll add an extra twist that could provide even more profit potential.

The Juice (optional): Buy the AMD Mar $14.5/$15.5 debit call spread for 28 cents to open. If I am correct and AMD stock rallies past my spread, I could gain up to 70 cents per contract. A more aggressive version of this would be to buy naked calls instead.

I am not obliged to hold any of these trades through their expiration. I can close any of the for partial gains or losses at any time.

Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.

Nicolas Chahine is the managing director of SellSpreads.com.


Article printed from InvestorPlace Media, https://investorplace.com/2017/02/ride-red-hot-advanced-micro-devices-inc-amd-stock-for-free/.

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