Showing posts with label AMD. Show all posts
Showing posts with label AMD. Show all posts

Saturday, 14 June 2014

NYSE: AMD analysis

AMD shares closed with 2 white candles with relatively high volume on 10 and 11 June. On these two days, there is no apparent reasons why the shares moved with volume. One day later, the news revealed.

Headline: AMD reorganizes (MarketWatch) which states the plan of the company to consolidate some of its business segments and appointed a new chief operating officer. Another news concerns about its rival, Intel (INTC) which loses appeal against record $1.43 billion EU fine (MarketWatch). I think AMD didn't earn any money from this, but morally, is a good news that push AMD share.

On 12 June, the share opened higher @ 4.33, trading high @ 4.44, but closed @ 4.29. A newbie technical chart:

The share has just broken its upper Bollinger Band (BB), with volume. This is a good sign for the share price. A black candle on 12 Jun, could it be a "washing" process? Not sure, still fumbling in US markets. Let's see what happens in the next few weeks.

Back in 2006, AMD bought over ATI (Engadget), a big move by the company at that time. Since then, the company has shaped its future direction, to combine a CPU with graphics technology into one single chip, known as APU (Accelerated Processing Unit). I like this idea. By now, more and more APUs are being installed on laptops, easily observed when you walk into a computer shop. In gaming console areas, XBox One is using AMD APUs too. You can find chips made by AMD in personal computers, tablets, game consoles and cloud servers as well.

If the direction of APU is right, it could be very rewarding in years to come. 

Friday, 14 February 2014

NYSE: Selling call options: some basic stuffs

This time is the seller of call options. Selling options will always earn you premium, as you get the chance to be the "insurance company", as if collecting premium from buyers who wish to protect their shares. 
Case 1: Out of money

Buy: AMD JanWk5 3.5
Strike price = $ 3.5
Expired date = 31 Jan 2014
Cost: 0.13/options = 0.02*1000 = $ 20 + ($ 15.35 brokerage)
AMD cloased at 31 Jan 2014 = $ 3.43

AMD @ 30 Jan 2014 = $ 3.45. It has little chance to close above $ 3.50, hence the premium is very small. At the expired day, AMD closed below strike price, so premium was collected free by call seller.

Case 2: In the money

Buy: AMD JanWk5 3
Strike price = $ 3.5
Expired date = 31 Jan 2014
Cost: 0.13/options = 045*1000 = $ 450 + ($ 15.35 brokerage)

Call options is in the money at the expired date, i.e. call options will be exercised. I am required to sell the share @ $ 3 to the call options buyer. If I will to buy back immediately, this will cause me a loss of $ (3-3.43) = - $ 0.43 / share. But I collected premium from selling the call. So is a different story.

Based on yesterday closed price of $ 3.70, if I buy back to close my position, my net loss will be:

+ $ 450 - $ 3000 + $ 3700 = - $ 250.

There is something known as Sell Covered Call, which is pretty common in options. Covered here means that you own the mother share, and at the same time, selling call options to earn premium. If the shares go down, the premium collected will be yours. If the share rises, you still earn from having the upside of the mother share. This looks to be a good deal, although still need some time to have a deeper look on it.

Wednesday, 29 January 2014

Put options fundamentals: part 2 (end)

21 Jan 2014 is the fiscal date for AMD, announcing the financial results for Q4 2013. US companies are given one month to announce financial results, while Malaysia companies are given 2 months. The environment in Malaysia is really "senang" (relax), typical Malaysian style, I like it.

For the year 2013, AMD suffers a net loss of 83M or loss per share of $0.11. Refer to NYSE Press Release for details.

On 22 Jan 2014, AMD gap down with huge volume, after announcing a worse-than-expected financial results. Oh, this is the same as in Malaysia too. Gap down after a bad financial result, as what happended to ZHULIAN recently.

AMD chart
AMD Chart

AMD put options Jan wk 4 2014
AMD Put Option @  $4, Jan wk 4 2014

Put options has opposite trend against the mother share. As AMD price goes down, put options will have a higher value, and vice versa, as shown in the above figure.

24 Jan 2014 is the expiration day for this option. Both NYSE and NASDAQ suffered losses of about 2%, quite a huge loss in single day. AMD closed at $3.47, well below the strike price of $4. Since the price is below the strike price, put options buyer will definitely exercise his/her rights to sell
the share @ $4 to me. (e.g. imagine you hold an insurance policy (options buyer), that accident happens to you some day (touch wood), for sure you will claim from the insurance company (options seller))

put options exercised

Last row shows my sell transaction, that the premium I gained.
2nd row shows that AMD share was assigned to me @ $4/share. I have to buy it at this price. Since the mother share is trading @ $3.47, this means that I incur a loss of 0.53*1000 = 530 IMMEDIATELY.
1st row is to close my options position.

This means that my net loss in this trade is: 190-530 = -$340

If, say, I do not want to hold AMD share. I can opt to buy the put options to close my position. The put options closed at $ 0.56 on 24 Jan 2016. This means that I have to pay 0.56*1000 = 560 to buy back the put options.

In this case, my net loss is 190 - 560 = -$370

Is almost LPPL (i.e. almost the same). Of course, seeing that AMD plunged few days before the expiry date, I could have bought the put options to close my positions way earlier, to limit my loss. Another choice is to hold AMD until it recovers. But the catch for this is that my money will be locked in the share. Whatever decisions to make is dependent heavily on the capital, and this must be determined before executing the transaction.  

Sunday, 26 January 2014

Put options fundamentals: part 1

In options, you have the choice to be the buyer or seller. I believe this is exactly how this financial derivative obtained its name, because you have the choice to opt.

There are lots of internationally well-known companies listed on US market, e.g. AMD. I like this company, because I did my industrial attachment there. AMD (NYSE: AMD), microchips manufacturers, Intel's competitors. Without AMD, computer markets will be monopolized by one company, and we will not have affordable computers to use.

Call is the financial term meaning "going up", i.e. when you buy call warrant, you expect the share price to go up. Put is the opposite of call. One will buy put options if he/she thinks that the share price will fall below a specified price in a particular time frame. When one sells put option, he/she think the other way round, i.e. the price wouldn't fall below the strike price. 

I sold AMD put options on 17 Jan 2014.

Options sold: 1000
Price: $0.19/option
Strike price = $ 4 (strike price = exercise price in Malaysia)
Expire on: 24 Jan 2014

Note: AMD closed at $ 4.18 as at 17 Jan 2014. This price is above the strike price, i.e. the put options should have zero value if AMD stays above $4 at 24 Jan 2014. The premium (i.e. $0.19/option) is due to the buyer thinks that in 1 week time, AMD could potentially fall below $4. Being the options seller, I think that AMD wouldn't fall below $4 in 1 week time. 

This contract implies that:

1. I will get a premium of $ 0.19*1000 = $190
   Total sell = 0.19*1000 = $ 190
   Brokerage fee = $ 15.36
   Net premium gain = 190 - 15.36 = $ 174.64
   N.B.: In selling put options, a portion of your capital will be locked, to ensure that you have the money to purchase the mother share should the option buyer exercise his/her rights.

2. If, until 24 Jan 2014, AMD stays above S4, then the premium I got from selling the put options will be my free money. Put options buyer paid $190 to protect his/herself until 24 Jan 2014. Options buyer pay a premium to protect the mother share from falling. This is analogous to insurance, where you (options buyer) pay a premium to the insurance company (options seller). If nothing happen to you (i.e. stock price did not fall below the strike price), the premium will be free money to the seller. If something happens to you (i.e. stock price falls below the strike price), you can exercise your right to claim from the insurance company (i.e. seller).

3. Should AMD go below $4 before 24 Jan 2014, say $3.5, then the put options buyer can exercise his/her rights to buy the share at $3.5/share, and sell it at $4/share. But at that time AMD is trading at $3.5, who will pay $4 to buy the share? The put options seller. This is the obligations tied to the options seller, i.e. in this case, the "insurance" works, the buyer can claim money from the insurance company (options seller)

[to be continued]