Advanced Micro Devices has been under significant pressure leading up to earnings after the close. The stock has been caught in the swings of the AI debate all year, but this most recent leg lower was triggered by a wave of disappointing tech earnings.
A record drop in Alphabet last Thursday was followed by weak results from Amazon, as well as AMD's long-standing CPU rival, Intel. Intel guided fourth-quarter revenue well below consensus and expects the PC slowdown to last through at least the first half of next year. That sent Intel's stock down 29% on Friday, its worst day since the 1970s. Caught in the fallout of Intel and the broader tech sector, AMD fell 10.9% that day and slid another 7.5% Monday.
For the past week, AMD has traded on other companies' news. Now its own numbers get a vote. AMD's stock reactions have been mixed in recent quarters, sensitive to guidance and high investor expectations. It fell 17% after Q4 2025 results, when a beat and a guide above estimates still underwhelmed some analysts. It rose 18.6% after Q1 2026 results, when it guided about 6.5% above expectations. It fell 7% after Q2 2026 results, when a guide above consensus still fell short of the $14 billion some analysts wanted. That may make direction hard to call, but options let investors build a trade that doesn't have to pick a side.
Based on Monday's close, I'm selling the November 4 425/415 put spread and the 510/520 call spread for a credit of roughly $3.65.
AMD's 30-day implied volatility is elevated going into earnings, closing Monday higher than on about 81% of days over the past year. This means sellers are collecting richer premium than usual. To capture that premium while limiting time beyond the earnings announcement, the trade uses the November 4 weeklies. These contracts imply a move of about 9% through Wednesday, in line with AMD's 8.4% average close-to-close move over its last 10 reports. The short strikes sit at the edges of the expected move, with long strikes $10 away to limit capital at risk going into earnings. This isn't a bet that options are mispricing the move or a directional call. It's a neutral play that aims to profit from the elevated premium that tends to come out after the print.
The trade reaches its maximum profit of $365 if AMD closes between $425 and $510 on Wednesday. Breakevens are $421.35 and $513.65, about 9.7% below and 10.0% above Monday's close, just outside the expected move. The maximum loss of $635 comes if AMD closes below $415 or above $520, roughly 11% in either direction. That has happened in 11 of its last 40 reports, and AMD has had moves as large as 19% in its last four, emphasizing the importance of capping the risk with the long wings.
If AMD finishes between $415 and $425, the short put can be assigned, creating an obligation to buy 100 shares per spread at $425. After the credit, the cost basis is $421.35, or roughly 35% below the Oct. 6 closing high. For investors who like AMD's long-term story, that's a way to end up owning the stock at a discount. A finish between $510 and $520 can assign the short call and leave a short stock position. For investors looking to avoid either risk, consider managing the position before Wednesday's close.
Disclosures: Spina owns this trade.
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