Advanced Micro Devices Inc (AMD)

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Worst Stocks Heading Into 2020
By: Schaeffer's Investment Research | October 2, 2019

• A look at two historical underperformers with attractively priced options
• AMD and UAA stocks could face seasonal headwinds

Stocks are off to a rough start in October, as lackluster economic data spooks investors. What's more, several stocks could be in for a rough month, or quarter, if recent history is any indicator. Among the worst stocks to own in October and the fourth quarter, respectively, are semiconductor concern Advanced Micro Devices, Inc. (NASDAQ:AMD) and athletic apparel retailer Under Armour Inc (NYSE:UAA).

AMD AVERAGES STEEP OCTOBER LOSSES

Below are the 25 worst S&P 500 Index (SPX) components to own in October, looking back 10 years, with data courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. While AMD has ended the month higher 40% of the time, the stock has averaged a loss of 9.72% in the month -- by far the steepest on the list.



Advanced Micro Devices stock has given up 19% since touching a decade-plus high of $35.55 in early August, last seen trading at $28.82. The equity is now testing support in the $28 area, which contained its pullback over the summer. This region also represents a roughly 50% year-to-date gain for AMD shares, and is in the vicinity of its 160-day moving average. Of course, while AMD's short-term trajectory could be determined by U.S.-China trade talks, another 9.72% drop in October would put the shares well below potential support, down near $26.45.



Despite the security's pullback over the past couple of months, AMD option buyers have rarely been more bullish. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 5.16 indicates traders have bought to open more than five AMD calls for every put in the past two weeks. This ratio sits at the very top of its 12-month range. In the event of another October slide, an unwinding of optimism among options traders could exacerbate selling pressure on the semiconductor concern.

Meanwhile, traders looking to speculate on AMD's short-term trajectory should consider buying options. The equity's Schaeffer's Volatility Index (SVI) of 49% is higher than just 13% of all other readings from the past year, suggesting near-term option contracts are attractively priced at the moment, from a historical volatility standpoint...

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