The 2017 semiconductor war has begun, and Advanced Micro Devices, Inc. (NASDAQ:AMD) is coming out guns blazing. The “upstart” chip maker released details on its new Ryzen CPU last week that puts AMD’s latest chipset squarely in the path of Intel Corporation’s (NASDAQ:INTC) top-of-the-line i7 processors. And, at half the price for more processing power, AMD isn’t playing around at being the low-cost leader this time around.

The duo have sparred repeatedly before, most notably during the PC market boom of the early 2000s. At the time, Advanced Micro Devices billed itself as a low-cost alternative to Intel’s processors, with Intel clearly holding the lead in terms of sheer power.

This time around, however, the PC market is nowhere near as robust, with consumers carefully weighing not only processing power, but also value.

This time around, AMD stock appears to have the clear edge on both, with the Ryzen 7 1800X priced at $499 compared to Intel Core i7-6900K at $1,000. According to CEO Lisa Su, AMD’s new chips offer “More performance, half the price.”

The real story, however, is the cost/performance of AMD’s lower-end Ryzen chipsets. Specifically, if Ryzen 1400X, priced at $199, can match or beat the latest Intel K-series i7 chips, AMD could corner the market on budget-conscious PC gamers.

Furthermore, Ryzen chipsets will reportedly auto-overclock (i.e. run as fast as they possibly can, as long as you keep them cool). This may not be a big deal to the hardcore PC gaming market that is familiar with tinkering and overclocking their own machines, but for entry- to mid-level gamers, auto-overclocking is a very big deal.

Impact on Advanced Micro Devices, Inc.

With Ryzen showing significant market potential, you have to wonder what Wall Street analysts are waiting for. According to Thomson/First Call, only 11 of the 26 analysts following AMD stock rate the shares a “buy” or better. Furthermore, the average 12-month consensus price target rests at $11.79, representing a discount of nearly 20% to Friday’s close.

Maybe analysts are waiting until the embargo period on Ryzen reviews ends later this week, or maybe they are waiting on Intel’s response to the new AMD threat. Either way, we should find out relatively soon, and since Intel has a history of cutting prices only as a last resort, any move on price for the CPU leader could signify that AMD is a greater threat than many are anticipating.

What’s more, there is the very real potential for a short-squeeze situation for AMD stock. As of the most recent reporting period, roughly 100,000 shares of AMD stock were sold short, representing nearly 13% of the stock’s total float. Early Ryzen reviews and/or analyst upgrades could spur a jump in AMD’s price, potentially sending these short sellers rushing for the exits to limit losses.

Finally, AMD options traders appear to be anticipating a breakout for the shares. Currently, the March put/call open interest ratio rests at 0.62, with calls nearly doubling puts among short-term options. Some of these call may be related to short sellers hedging their bets, but, either way, the outlook here is bullish for AMD stock.

Click to Enlarge How much of a move is the options market pricing in for AMD? According to March implieds, options traders are pricing in a move of about 10% for AMD stock, placing the upper bound at $15.46 and the lower bound at $12.54. With strong support in the $13 region, a drop to $12.50 appears unlikely, while a breakout above $15 could help kick off a short-covering rally and send AMD even higher.

2 Trades for AMD Stock

Call Spread: Traders looking to get in on Advanced Micro Devices ahead of a potential Ryzen driven breakout might want to consider a March $15/$16 bull call spread. At last check, this spread was offered at 30 cents, or $30 per pair of contracts. Breakeven rests at $15.30, while a maximum profit of 70 cents, or $70 per pair of contracts, is possible if AMD stock closes at or above $16 when March options expire.

Put Sell: Alternately, if you’re looking to take a more cautious stance on AMD stock’, a March $12.50 put sell has a high probability of finishing out of the money. At last check, this option was bid at 17 cents, or $17 per contract. As usual with a put sell, you keep the premium as long as AMD stock closes above $12.50 when March options expire.

On the downside, if AMD trades below $12.50 prior to expiration, you could be assigned 100 shares for each put sold at a cost of $12.50 per share — which, in all honestly, would be a steal looking at AMD’s potential in 2017.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.