Volatility Play In AMD?

Advanced Micro Devices (AMD | Quote | Chart | News | PowerRating), mentioned in my Stock Outlook as a potential volatility play (a), may provide an opportunity for long calls. Under an ideal situation, price would move higher on a breakout/trend continuation as volatility reverts to its mean. This would provide the ultimate environment for the long call holder: higher prices and volatility. With that said, the March in-the-money and slightly out-of-the-money calls appear to be fairly priced. For those with money to burn (seriously, with three days left, this is a risky trade), the February 25's trading at 13/32 could offer a gamma play (one more warning: don't forget "gamma get ya").

Oil service ($OSX.X | Quote | Chart | News | PowerRating) appears to be stabilizing after pulling back. This suggests that its choppy uptrend remains intact. Look for buying opportunities in calls and call spreads here on any resumption of strength.

The major drugs ($DRG.X | Quote | Chart | News | PowerRating), viewed as defensive issues, failed to rally in spite of Tuesday's weakness. This has them failing (b) near their recent highs (a) and suggests that they have the potential to return to the bottom of their trading range (c). Look for buying opportunities in puts and put spreads here.

Best of luck with your trading on Wednesday!

P.S. Reminder: Protective stops on every trade!