Supermicro Semiconductor Corporation ( Advanced Micro Devices, AMD) has been under significant pressure before releasing its financial reports after the market closed. Throughout the year, the stock's price has fluctuated in tandem with debates related to artificial intelligence, and the recent decline was triggered by disappointing financial reports from a number of technology companies.
Last Thursday, Alphabet recorded a record decline, followed by Amazon announcing weak financial results. Intel, AMD's long-standing CPU competitor, also delivered a poor report. Intel's revenue forecast for the fourth quarter fell far short of market expectations, and it is anticipated that the PC market slowdown will continue at least until the first half of next year. This led to a 29% plunge in Intel's stock price on Friday, marking its worst single-day performance since the 1970s. Dragged down by Intel and the broader tech sector, AMD fell 10.9% on that day and continued to decline by 7.5% on Monday.
Over the past week, AMD has been fluctuating in response to news from other companies. Now, it's time for its own performance to be put to the test. AMD's stock price has reacted differently after each set of financial reports in recent quarters, and it is highly sensitive to performance forecasts and investors' high expectations. After the release of fourth-quarter results for the 2025 fiscal year, although the company's performance exceeded expectations and the forecasts were also higher than anticipated, it still failed to satisfy some analysts, resulting in a 17% drop in the stock price. Following the release of first-quarter results for the 2026 fiscal year, the company's forecasts were about 6.5% higher than expected, leading to a 18.6% increase in the stock price. After the release of second-quarter results for the 2026 fiscal year, although the forecasts were higher than the market consensus, they were still below the $14 billion expected by some analysts, causing the stock price to fall by 7%. This may make it difficult to determine the direction of the stock price movement, but options allow investors to construct trades that do not require a bet on a one-way trend.
This transaction
Based on the closing price on Monday, I sold the November 4th expiration 425/415 put spread, as well as the 510/520 call spread, and collected a total of approximately $3.65 in premium.
The 30-day implied volatility of AMD was at a high level before the financial report, and by the close on Monday, it was higher than on about 81% of the trading days over the past year. This means that the premium charged by the sellers was more substantial than usual. In order to obtain this premium and also to limit the time exposure after the financial report is released to a shorter period, options from November 4th were used for this trade. These contracts imply that AMD will fluctuate by about 9% by Wednesday, which is roughly consistent with the average closing-to-closing volatility of 8.4% over the past 10 financial reports of AMD. The strike price of the sold option was set at the edge of the expected volatility range, while the protective leg of the bought option was set 10 dollars away from it, in order to limit the capital risk before the financial report. This is not a bet on mispricing of the options, nor is it a directional judgment; rather, it is a neutral strategy aimed at profiting from the higher premium that typically falls after the financial report is released.
If AMD closes between $425 and $510 on Wednesday, this trade will achieve a maximum profit of $365. The break-even points are $421.35 and $513.65, respectively, which are about 9.7% lower and about 10.0% higher than the closing price on Monday, slightly outside the expected range of fluctuations. If AMD closes below $415 or above $520, the maximum loss would be $635, which is roughly equivalent to a fluctuation of about 11% in either direction. This situation has occurred 11 times in the past 40 financial reports, while AMD had the largest fluctuation of 19% in the recent 4 financial reports, highlighting the importance of using protective positions on both sides to limit risks.
If AMD ultimately closes between $415 and $425, the sold put options may be exercised, resulting in an obligation to buy 100 shares at a price difference of $425 per lot. Including the premium received, the holding cost is $421.35, which is about 35% lower than the high close on October 6th. For investors who are optimistic about the long-term logic of AMD, this represents a way to hold the stock at a discount. If the closing price falls between $510 and $520, the sold call options may be exercised, leading to a short position in the stock. Investors who wish to avoid these two types of risks may consider managing their positions before the close on Wednesday.
Revelation: Spina holds the aforementioned trading positions.
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