AMD's Post-Earnings Rally and Bull Put Spreads: Navigating Volatility with Precision

The semiconductor industry's relentless pursuit of innovation has turned Advanced Micro Devices (AMD) into a poster child for growth—and volatility. With its stock soaring on AI-driven demand and data center wins, AMD's post-earnings rallies have defied the “sell before earnings” mantra. Yet, this volatility also creates fertile ground for options traders. In this article, we explore how bull put spreads can exploit elevated implied volatility post-earnings, offering bullish investors a defined-risk strategy to capitalize on AMD's trajectory while hedging downside exposure.

The Paradox of AMD's Post-Earnings Volatility

AMD's stock has historically surged following earnings reports, particularly when its data center and AI segments deliver surprises. For instance, after its Q1 2025 results on May 6, AMD's shares rose 8% as revenue hit $7.4 billion, fueled by a 57% jump in data center revenue. Yet, the path to these gains is fraught with volatility. Implied volatility (IV) for AMD's options often spikes ahead of earnings, then collapses afterward—a pattern that creates opportunities for those willing to navigate it.

The key insight? High IV post-earnings compresses option premiums, allowing traders to sell out-of-the-money puts at a premium while buying deeper out-of-the-money puts as a hedge. This is the essence of the bull put spread—a strategy ideal for AMD's volatile but upward-trending market.

Bull Put Spreads: Structure and Timing

A bull put spread involves:
1. Selling a put option at a near-the-money strike.
2. Buying a put option at a lower strike, creating a credit (premium received).

The maximum profit is the credit received, while maximum risk is the difference between strikes minus the credit. Crucially, this strategy profits if AMD's stock remains above the sold put's strike at expiration.

Timing Around Earnings

The optimal time to execute this strategy is immediately after earnings, when IV is elevated but beginning to decline. For example, after AMD's Q2 2025 earnings on August 5, traders could:
- Sell the AMD Aug 2025 $140 Put (if the stock is near $145).
- Buy the AMD Aug 2025 $130 Put.
- Credit: $3 per share (assuming $300 total credit for 100 shares).

The elevated IV post-earnings ensures a higher premium for the sold put, while the bought put limits downside risk to $10 per share (minus the credit). If AMD's stock remains above $140 by expiration, the trader keeps the credit. Even if the stock dips slightly, as long as it stays above $130, partial gains are secured.

Strike Selection and Risk Management

The distance between strikes determines risk-reward. A wider spread (e.g., $140/$130) increases potential credit but raises risk. A narrower spread (e.g., $140/$137) reduces risk but lowers profit.

Key considerations:
1. Stock Price Direction: Only execute if bullish. AMD's 2025 guidance of double-digit revenue growth supports this outlook.
2. IV Levels: Target setups where IV is above its 50-day average, as seen post-Q1 earnings.
3. Expiration Timing: Use weekly options expiring 1–2 weeks after earnings to capture short-term volatility decay.

The GLD Parallel: Volatility-Driven Opportunities

Gold (GLD) often sees IV spikes during geopolitical crises, yet its long-term trend remains stable. Traders use bull put spreads to profit from these volatility spikes without betting on gold's direction. Similarly, AMD's structural growth in AI and data center markets provides a bullish anchor, making the strategy analogous to GLD's volatility plays.

Case Study: Q2 2025 Earnings Setup

Assume AMD trades at $145 on August 6 (post-Q2 earnings). A trader could:
- Sell AMD Sep 2025 $140 Put at $4.
- Buy AMD Sep 2025 $135 Put at $1.
- Net Credit: $3 per share ($300 for one spread).

• Break-even: $137 per share ($140 strike minus $3 credit).
• Max Profit: If AMD stays above $140, the trader keeps the $300.
• Worst Case: If AMD drops below $135, loss is limited to $200 ($5 strike difference minus $3 credit).

This aligns with AMD's historical post-earnings behavior: sharp rallies often follow volatility spikes, making the $135–$140 range a reasonable risk/reward trade-off.

Conclusion: AMD's Volatility as a Strategic Asset

AMD's post-earnings rallies are not just speculative events—they're predictable phenomena fueled by its dominance in AI and data center markets. Bull put spreads allow investors to participate in this momentum while capping downside risk. By timing entries around earnings-driven volatility spikes and leveraging the GLD-like volatility decay, traders can turn AMD's turbulence into a systematic profit engine.

For investors: Act swiftly after earnings, target IV levels above 30% (AMD's 52-week average), and prioritize spreads with 5–10% strike distance. AMD's trajectory suggests that volatility will persist, but so will its upward bias—making bull put spreads a strategy worthy of serious consideration.

Invest wisely, and let the volatility work for you.