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Advanced Micro Devices (AMD) has been getting a lot of attention. Just last month, Melius Research set a $175 high price target for the stock, and it recently reached $174.70 in intraday trading.
Analysts have increased AMD’s high target price to $200, which has many bulls celebrating. However, those wary of the stock’s meteoric rise are starting to voice concerns over stretched valuations at 52.43 forward P/E, and overoptimism about its prospects against its biggest competitor, the $4-trillion behemoth NVIDIA.
Today, I’ll show you potential options trades for AMD that will allow you to capitalize on that volatility, depending on your outlook.
If you think AMD’s run hasn’t lost steam yet, you can bet on its future uptrend using a long call.
A call is a contract that gives you the right but not the obligation to buy an asset at a specified strike price at or within a specified expiration date.
It allows you exposure to the stock’s upside potential without owning the stock itself, at least until you exercise your right to buy it.
With long calls, the maximum loss is limited to the initial premium you pay for the trade, regardless of how much the underlying asset moves against you.
The great thing about long calls is that they gain value as the stock goes up and becomes more volatile.
An option premium has two parts: the intrinsic and extrinsic value.
The intrinsic value of the long call’s premium is simply the difference between the stock trading price and the strike price. Meanwhile, the extrinsic or time value is arguably the component that makes options trading so attractive.
Since options are time-bound contracts, the time left before expiration factors into the option premium, and implied volatility, interest rates, and the price movement of the underlying asset also influence extrinsic value.
Extrinsic value diminishes over time. However, if the stock moves favorably within the contract’s lifetime, you may be looking at profits exceeding those you would have if you just owned or sold the stock the regular way.
Today, I’m looking for trades expiring on October 17, 2025 (81 DTE). These trades are found through Barchart’s Long Call Screener for AMD:
And here are the results.
According to the screener, you can buy a near-the-money, 175-strike AMD call for $15.15 per share or $1,515 total. The breakeven price is $190.15, and the trade has a 33.91% chance of turning a profit. This trade is probably best suited for bullish investors who believe that AMD will surpass its $200 high target price before October 17.
A glance at the Profit/Loss Chart (located at the top-right of the results page and on the icon between the trading price and expiration date) indicates that volatility is currently average, which works well for your trade if volatility spikes afterward.
Jumping over to the Expected Move tab, you can see that AMD stock is anticipated to trade between $148.38 and $198.94 by October 17, 2025. This gives you an idea of where option traders expect the stock will trade by your expiration date.
Now, if you think AMD’s price performance is running into a wall, you can consider buying a long put instead.
The long put gives you the right but not the obligation to sell the stock at the specified strike price at or within the specified expiration date, and you pay for that right. It’s essentially a bet that the stock will go down within your contract period – practically a mirror setup of a long call, only in reverse.
So here’s a trade example for AMD using Barchart’s Long Put Screener this time.
According to the screener, you can buy an out-of-the-money 170-strike long put for $12 per share or $1,200 total. Your breakeven price is set to $158, and the trade has a 67.18% chance of being profitable. Therefore, if AMD trades below $158, this long put will begin to become profitable.
According to its price chart, AMD gapped up between $146 and $153, indicating that this will likely be a strong support range should the stock pull back. Since your breakeven price is above the support level, you may benefit if the stock tests that range or, even better, falls through it.
Other key technical turning points around that area can be seen here, through the Trader’s Cheat Sheet on the site:
Meanwhile, the lower point of the expected range is at $148, which gives you ample space and profit should AMD drop to that level, as long as the contract still has time.
For both strategies, the best way to take profit is to sell your long options before expiration to benefit from whatever extrinsic value is left.
Options trading is a versatile way to earn money regardless of market conditions. You only need to pick the right strategy, the right underlying asset, and the right timing to allow your market outlook to play out.
However, it does come with risks. While long options don’t necessarily come with infinite theoretical losses, you could still lose your premium. Lose enough times and your capital will erode, especially without a solid risk management plan in place.
That’s why due diligence is non-negotiable. But with Barchart’s interconnected market features, you can have access to everything you need to do your research.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
