To The Moon

This article is to share why I think $Advanced Micro Devices(AMD)$ might make a good candidate for option trading as I already hold shares for AMD. We have been seeing the bulls playing good defense around the low 150s.

I am holding AMD for my long term portfolio but do not mind to add more with a pretty good price.

Though we are seeing some big red days and AMD have been trading around these common areas.

Technical Analysis - Nice Engulfing Move

We are looking for monthly higher low. We can also view this as a very nice engulfing move into a cup and handle pattern formation and this looks like for a daily expansion.

There are active options chains visible on Yahoo Finance, MarketChameleon, Barchart, etc.

The implied volatility for AMD is decently elevated (tech/chip stock), so premiums are nontrivial.

AMD implied volatility (IV) is 42.1, which is in the 40% percentile rank. This means that 40% of the time the IV was lower in the last year than the current level. The current IV (42.1) is 3.5% above its 20 day moving average (40.6) indicating implied volatility is trending higher.

Estimating 30-60 DTE Premiums & Strike Choices

In this section, this is how to think about what could be “reasonable” based on what is generally available.

What to watch in the chain

When you look in the chain, we would want:

• Puts with various out-of-the-money (OTM) strikes (e.g. 5-15% below current price) for the “sell put” leg.

• Calls with various OTM strikes (above cost basis) for when you own the stock and want to sell covered calls.

• Good open interest and bid-ask spreads, to ensure reasonable liquidity.

We will also see that further strikes out reduce premium, and closer strikes (or closer to ATM) have higher premiums but higher risk of assignment.

Sample Strike / Premium Estimations for AMD (30-60 Days Out)

Here are a few estimated setups (these are hypothetical, based on typical premium behavior; non-guaranteed). I will be using these as examples to compare to live quotes:

Then for the covered calls (once assigned), likely strikes might be:

Example Wheel Strategy Using Estimated Live-Like Premiums

Putting it all together, here is a hypothetical wheel cycle for AMD in the 30-60 day window:

Sell a cash-secured put

• Expiration: ~45 days out

• Strike: US$145 (≈ 8-9% OTM)

• Premium received: assume US$5.50 per share (≈ US$550)

• Break-even: ~US$139.50

If assigned (we end up owning 100 shares at cost basis ~US$145 - premium = ~US$139.50):

Sell a covered call

• Expiration: another ~30-45 days

• Strike: US$170 (≈ 20% above your cost basis)

• Premium: assume US$4.50 (≈ US$450)

If called away: we realize capital gain + collected premiums. If not called away: we keep stock + premium and can either continue selling calls, or at some point sell puts again if you want to re-enter or harvest more premium.

So I feel that this strategy would suit my current portfolio, and I could also collection premium and also do not mind to add more shares to my current holding of AMD.

Summary

The valuation of AMD still remains extremely fair in around 150. AMD is trading at a 1.3 peg and the revenue and EPS growth multiples for the company have been fantastic.

The wheel strategy is an excellent way to generate passive income from an existing AMD position. By selling covered calls on your shares, you collect a premium, essentially acting as a landlord for your stock. This strategy is most effective when the stock is in a range-bound or slightly bullish market, as it allows you to consistently earn income while waiting for a significant upward move.

AMD's volatility makes this a particularly attractive strategy, as higher volatility often leads to higher option premiums. If the stock gets "called away" (sold at the strike price), you get to keep the premium and realize a capital gain. You can then restart the "wheel" by selling cash-secured puts at a lower strike price to reacquire the stock at a discount. This provides a systematic way to earn income and potentially lower your cost basis on a stock you're already committed to holding long-term.

Appreciate if you could share your thoughts in the comment section whether you think AMD is a good candidate for wheel strategy with its solid company at a pretty decent valuation.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.