Given that AMD is scheduled to report its third-quarter earnings on October 24, 2024, a profitable option trade strategy would be to sell a covered call option. This strategy allows you to hedge your position in AMD while also earning premium income.
Here's a simple guide to implementing this strategy:
- Sell a Covered Call Option
- Position: Sell 1 AMD Oct 24, 2024, $160 Strike Call Option
- Premium Received: $2.50 per share
- Action: Sell the call option for $2.50 per share, which you receive as premium income.
- Rationale: You are long AMD shares and want to protect your position from potential downside volatility. By selling a call option, you give the buyer the right to buy shares at a higher price ($160), but you retain the opportunity to sell shares at that price if the stock price rises.
- Greece Profit Analysis
- Maximum Profit: Limited to the premium received, which is $2.50 per share in this case.
- Profitability: This strategy is profitable as long as AMD's stock price remains below $160 during the option's expiry. If the stock price is above $160, the call option will be exercised, and you can sell shares at the higher price.
- Risk Considerations
- Downside Risk: If AMD's stock price rises above $160, you may have to sell shares at a lower price than intended.
- Time Decay: The value of the call option will decrease over time due to time decay, which can work in your favor if the stock price remains stable or declines.
Remember to monitor AMD's earnings report and the stock's price movement leading up to and after the option expiry to adjust your strategy accordingly.
10/31/2024 09:09am
