Bull v. Bear: AMD "Impressive" Earnings Face NVDA Chipmaking Dominance

to Fast Market here on Schwab Network. On the earnings front, AMD next up at bat to release its quarterly results. It comes at a time where the tech trade is being tested. Shares of AMD slid about 18% in October, but are trading higher today and still have a big gain year to dmore than 130%. As for earnings, here's wherepet is looking for earnings of about 94 per share on an adjusted basis, which would be quarter and sharply higher than the same time a year ago. Revenue is expected to top 13.1 billion, which would mark an increase of more than 40% on a e spotlight will also be on datan, that vertical saw revenue more than doubled to 6.72 billion. Now, last week it came under major pressure. The stock. The outlook is key, though, because you may recall that AMD beat estimates and still fell after its last two quarterly results. All right. Time now for t of war on AMD. For that, let's welcome back in our cohost Tom White Hanks. It is bull versus bear time. All right, guys, before we get to your e trades, we've got to get your thoughts on the Lisa Sue run company. Kevin, I' with you. Your take. I think going to put out numbers and the numbers are going to be impressive. Does that mean the stock is up. I have no idea what the stock will do. But they're going to put up you know the client segment. They're going to put up numbers from the data center segment. I think PC sales outlook is going to be key. They're going to ha really clearly define what that. Remember when Intel p out their numbers, AMD is such a competitor with Intel Intel's numbers disappointed the stock sold off. So AMD. So you know people connect dots. And Py part of AMD that they've got to, you know, say what they're doing there. They've got to make it clear there is their risk that this stock could sell off. Yes. Not if they don't show good numbers. Remember Intel didn't. And so Ink the demand for AI processors is going to be a key t That's their growth engine. That's where they get their growth from. And so fourth quarter guidance you you see it in just don't want to know what you're doing. They want to know what the future is. And they're looking for any acceleration or deceleration. So the guidance is going to be critical. And so their new hardware rollout i going to be also very important. They're going to talk about a lot that boy. But this stock really moves earnings. It moved on Intel's earnings. So I expect it to move on their own earnings. It should be a big one. The expected move. What do we have right now. 35 just under $36. That'sy down a couple dollars today. So I expect a big move out of AMD. It's going to be a big one. Diane, T and Tom your take on AMD. Well you look at thaknow l% right on slowing PC sales. Well AMD is taking market share from Intel CPU side for hardware hardware s computer sales. Right. And those are down. The stock did fall 11% on Friday in conjunction with Intel's 29% drop, but this stock is still up 130% this year. So if you that they don't have, you know, you know, the potential to go you know, based on that, if they give bad guidance like Intel d Intel gave bad guidance, right? Moving forward, they missed on EPS, they missed on revenue. So there are some concerns. The stock's off about 25% from its recent all time highs that we hit just last month above $658. So that's a little bit of a reprieve.ut you're seeing a jump here of over 5%. I just don't know if the GPU side where they're trying to compete with Nvi with their, you know, mi 450 moving forward and some of their other highly specialized AI chips, how much they're ig into Nvidia's market share there, which is about 90%. AMD has about 10% at this point. So those are the things that you haveo look at. Revenue growth expected to be about plus 42%. Well look at after their last earnings right. They grew at 83% and the stock went up and now is down. We're back you know 210 bucks or for Nvidia at this point. So anything can happen on these results. If it's a good report the stock could still fall. If it's you know a good report the stock could pop. We just don't know a point. This is one of those really bifurcating type of sectors and individual names that can move pretty significantly post earnings. And we saw that from Intel last Friday. All right let to the example trades. Kevin let's start out with yours. What's your approach today. So my paper money trade is in the bullish camp. I looked at the expected move right. Like I said about right around $36. Look where the stock is right now. let's round it to something around $490. So w I looked at is an out of the money call vertical. But I'm buying it. So looking for that big move. I bought the November 13th. I gave myself a little call vertical. I paid about0 $7.70, closer to eight bucks now. And I'm looking for something very modest. I'm looking for a move to to $520 from 490. If I get that mov this could almost triple, right. It could be basically 150% on this. So that's what I'm looking for. Not interested in the the the implied volatility. Those those are out there. You couldutely look at them. This is just a call vertical. I know my risk on the trade. I'm looking for a move not even as big as the move just to move towards $520. Tom. it keeping it relatively fundamental here with this Buyig the 520 call, giving myself a little duration in case I need it. Tom. Yep. November 30thweeka pure earnings example that Kevin brought. It's a bulli call vertical out in the November 13th weekly cycle ten days to expiration. So yogot a s Kevin mentioned. But he's buying the 500 strike call. That's about $8 out of the money to the upside. And then against that to offset some of the costs selling the 520 call.0 wide call vertical paying roughly about a $7.70 debit on it. It's trading a little bit higher. The stock has moved higher with the overall market. But the pay is going to be a risk if you pay eight bucks, $800, if you pay 770, $770 in risk takes your break even up to 507 70 to the upside. Now that i only 3% above the current share price to the upside. So you do need to move, but only 3%. And as Kevin mentioned, a one day move in the stock, the option pricing in about a plus or -$36 move in either direc this one here, you only need about a $15 move to get above that break e 3% to the upside. You've got a good risk reward set upn this. The key is on Kevin's trade. You need to move on it right. If the stock kind of consolidates right here doesn't go above theo deteriorate. You're going to se price contract. You don't want the stock to go lower right. That's where you're go lose the debit that you paid on a trade like this. You do have a week and a half in this position. So if you don't get the move initially we' moves post earnings that don't mesh with what we saw in the pre-market or post-market. So take that into consideration. But a bullish call vertical good risk reward set up on this. But you do need a move on this type of trade to the upside above that 507 7 break even Kevin I went a little bit more passive. And I used a call butterfly that's unbalanced here where I'm actually going to take in a credit by buying this call butterfly here. I went out to the November 6th weekly option. So three days to expi this one. I'm going to buy one of the 530 strike call that's out o money by about $38 to the upside by one of the five 30s. Sell two of the 535 and then buy one of the five 60s. So unbalanced. Ca butterfly I'm pain or I'm collecting a credit of $3 this one. See, I'm not paying anything because it's out of the money to the upside skewed it. Broken wing call butterfly where I'm going to take in a credit of $3. What does that mean? Well, if the stock remains below 530, I just get to keep that $300 per spread that you collected on this position. Now, if the stock rallies and goes at or near the 535 strike where I'm short two options, that's where you can have max profitability on this trade of $800. And that would be right at that. 535 strike my break even on this one, Kevin. 4 or $543 to the upside on this one. So outside of that one sta deviation move that the option market is pricing in. The reason that I'm have a risk of $1,700 on this one is I've got a better probability of success. And I've got that little kicker here, Kev, at or near that 535 strike, which is about that onendard deviation. Yeah. Exactly what Tom has done. He's lined up his shorttrike with the expected move. Okay. Then built his butterfly. Let's call it a variation on a butterfly because it's a call butterfly trading for a credit andt it's actually would do just fine if the stock lower. Why? Because he's long a $5 call vert vertical above the market, but he's short a $25 call vertical above the market. That's where the ris comes in, right? If this stock were to go to $25, ifs spread via the short 535, that's where the $1,700 risk is. The good news is you wou $500 on the call vertical. You would make $300 on the credit that you took in, and the rest would be the risk. So you're loo for a move towards that. 535 and this is the way that you set up these butterflies for credits. The target is always the short strike. That's where this would max out. That's where you would put it on for credit and take it off for credit. And sohat's where it maxes out. But the risk is on the upside. It's defined's on te careful if it doesn't go out in between the strikes somewhere. Tom. Yep. And I think that's key. Is that 540 strike. You're break even. 543 to the upside. But the 540 strike has a probability of finishing out of the money at 80%. So this is high probability trade. You've got a lot of risk versus a potential reward. But evenyou'rk rallies up to 540, you're still going to be profitable on this one. So there you go Diane. Passive a long butterfly for credit.