AMD shares are pulling back Thursday after hitting yet another all-time high, and one options trader is betting that the chipmaker’s stock will fall by nearly 25%.
“The stock closed 38% above the 200-day moving average today. We tend to see these mean reversion trades pop up whenever the stock exceeds about 30% to 35% above its long-term moving average, and the stock traded very actively today,” OptionsPlay chief strategist Tony Zhang said Wednesday on CNBC’s “Fast Money.”
More than 2.6 million AMD options contracts changed hands in Wednesday’s session, which is about seven times the average daily options trading volume for the chipmaker.
One major trade stuck out among the rest.
“Ten-thousand contracts of the October 115/90-put spread traded for about $7.50, so this particular trader laid out $7.5 million to bet that AMD will return back toward the 200-day moving average, which is just a bit below the $90 short strike that they sold on this put vertical,” said Zhang.
This trade would see it’s maximum return if AMD were to drop to $90 per share, which would represent a 24% decline from where it closed Wednesday’s session.
AMD was trading about 6% lower on Thursday.