Drop in AMD Presents Opportunity

Shares of AMD (AMD) have dropped from $35.55 five weeks ago to $20.48 today, and this stock has been on our watch list for the past few quarters as it had traded in a choppy range from $26 to $35. There is further risk of declines in the short term based on overall semiconductor industry and geopolitical headlines, however, patient investors can be rewarded here based on where the stock is trading. AMD's newest EPYC and RYZEN processors are performing better than Intel's on numerous benchmark tests, and inventory has been thin as they sell out quickly and can't keep up with demand. We believe that they will figure out how to ramp up production and continue to outsell Intel in raw units sold which is already the case.

We'd be glad to own the shares at lower levels, and we are selling the November $25 Puts for $0.80, which expire in 52 days. If the stock remains above $24.20 we will keep the premium as the Put options expire, and if the stock drops below that level we will end up picking up the shares at a effective price of $24.20 which should present strong upside opportunity.