Wed, Aug 6, 2025, 7:42 AM 4 min read
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Imagine saying this to yourself in your best sinister voice: “That’s a nice profit you have on that stock there. It would be a shame if something happened to it.”
That voice in my own brain fires off every time I have a situation like the one I assume many are in with Advanced Micro Devices (AMD). However the concept I’ll show here is a strategy that can be applied to any stock or ETF that has a reasonably liquid options market. I use the Barchart options screener frequently, both to find good collar setups on the names I follow, as well to determine if they are sufficiently liquid.
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That latter question is a matter of personal preference. For instance, if the bid-offer spread on an option is small, and you are a self-directed investor like me, you’re likely not buying hundreds or thousands of contracts. So you can get what you want much of the time, in terms of trade size.
The semiconductor maker’s stock has gained 66% in just the past three months. As impressive as that is, it is far from the first time that’s occurred. It last happened from late 2023 through early 2024. And AMD has had several 50% runups since the pandemic in 2020.
However, it has also had many declines of 25%-35% over that period. Let’s face it, this is a volatile stock. And regardless of the fundamentals, AMD trades like most stocks do today: a little on fundamentals, but a lot based on market sentiment toward what the company is doing, And, how its industry, sector, and the broader market are doing.
All of this rings that alarm bell for me. I bought AMD back on June 9, at just over $120. So at $177 on Aug. 4, I was feeling concerned. Now that I had conquered the upswing in AMD, I was looking to collar it.
For full disclosure, I have collared AMD since the moment I bought the stock. But since this is instructional, let’s assume I had not used options and simply had a big gain on AMD.
This chart is not terrible. Just overvalued. But when I see that type of distance down to the 150-day moving average, that calls for some defense to join an appreciated offensive position in a stock.
That was the daily chart. AMD’s weekly (below) does not look urgently toppy to me either. The PPO indicator is quite high, but not yet threatening to roll over, as it did to mark that early 2024 top.
