Advanced Micro Devices Inc (AMD)

[kpf]

Petz

Just noticed that there's open interest of 145,334 contracts on the AMD Jan 06 $5.00 put. Perhaps a big chunk of the convertible holders decided to just insure their holdings against bankruptcy while keeping most of their appreciation potential.

As it is open interest, it would appear somebody seeks insurance, or did I misunderstand?

Also, rather than shorting the stock, some convert holders might sell LEAP calls, and get some cash flow.

Could be. But iirc the terms of the convertibles allow AMD to buy back from Feb 05 already. Writing anything for dates beyond that would be uncovered. Plus, you can only write strikes for calls or leap calls above conversion price without adding risk to the game.

I tried to find historical short interest figures for AMD, but the NYSE only has monthly on their website. SI did rise from 47.3 to 53.7M shares from 4/10 to 5/10.

Dilution from full conversion of senior notes is about 54M shares. As I said, I look at this figure as being the shares sold short to be converted later from senior notes.

K.