How to trade today's AMD earnings

AMD will release earnings as soon as it reaches your inbox after markets close today (along with GOOGL). Options traders are making big claims about what the outcome of this earnings release will be.

But before I get into where I think AMD will end up, I want to make a few points.

First of all, AMD has had a wide range this year, starting at around $134, peaking at $226 and currently printing around $164, having only hit $150 six days ago. This means AMD is at the lower end of the annual range.

Obviously, the chip stock is not having the same successful year as rival and AI darling NVDA.

From an options perspective, traders estimate that the implied move as I write this is a $13 move up or down. This puts the options IM (implied move) at an uptrend of around $177, while a downside IM is forecast at around $150.

This brings me to the question of how I think AMD's stock price will react to these gains.

The key to analyzing profits and options IM is to coordinate them with current options positioning. Check out the new options positioning tool Benzinga Option Schoolwe can see where the money is parked, with the green bars representing calls and the red bars representing puts. I note that the calls far outweigh the puts. Our top OI (open interest) Call is at 160, which is just below the current price.

$AMD Open Interest (2 weeks ahead)

Looking at the uptrend, I see pretty solid positioning up to $180, which is just above the options' implied upside ($177). I also see a “moonshot” target of $210, which is likely bullish Op-Ex (option expiry) targets for year-end or January.

On the downside, I see the highest OI put at $150, consistent with the implied bearish move in options. Below that I see a decent OI up to $140, with a significant reduction after that.

Therefore, the bears say $150, maybe $140 for the downtrend, while the bulls are targeting $180, maybe $210 by year-end or January Op-Ex.

Looking at the notional gamma of all options over the next two weeks, I can see in the chart below that $160 also coincides as the TGS (Top Gamma Strike), which is the strike with the highest gamma concentration for both bulls and bears .

$AMD Nominal Gamma Value (2 week forecast period)

This shows me that both sides agree that $160 is a key level. I consider this to be a “sticky” level around which price action will tend to move until a catalyst or flow imbalance emerges. Any decent earnings movement up or down should allow AMD to break free of that $160 level. Just a “meh” print without any real change/adjustment would keep AMD at around $160. I tend to play this scenario only 2 times out of 10 (20% chance) and lean towards a strong rise towards $180 or a weakening towards $150, maybe $140.

I'll be sharing more of our trading ideas live with the Benzinga Option School & Trade waves Members, so make sure you log in to see how I handle earnings this week. I hope to see you there.

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