Heavy Put Option Activity in Advanced Micro Devices Implies AMD Stock Is Overvalued - But Is It?

Core Viewpoint - Large volumes of short-term put options in Advanced Micro Devices (AMD) stock suggest it may be overvalued, but strong free cash flow (FCF) and FCF margins could indicate a higher price target for AMD in the next year [1][5]. Group 1: Stock Performance - AMD stock is currently priced at $260.40, showing an increase despite lower tech prices in the sector [1]. - Since the release of Q3 earnings on November 4, AMD's stock has risen over 4% from $250.05 [1]. Group 2: Options Activity - Heavy put options volume is noted, with four different tranches showing unusual activity [3]. - Some put contracts are closer to the money, indicating short-term positions taken by buyers expecting AMD stock to decline [4]. - Short-sellers of out-of-the-money (OTM) put contracts receive $2.76 for an obligation to buy shares at $252.50, yielding an immediate return of 1.09% [4]. Group 3: Financial Performance - AMD reported a revenue increase of 36% year-over-year and 20% quarter-over-quarter [6]. - Free cash flow (FCF) reached $1.53 billion, doubling from $496 million a year earlier and increasing by 29.7% from the previous quarter [6]. - The FCF represented 16.55% of quarterly revenue of $9.246 billion, an improvement from the prior quarter's 15.35% FCF margin [6].