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Traders are betting AMD’s rally has gone too far, too fast

Traders bet this hot chip stock is about to cool off

Advanced Micro Devices has been on a tear this year, but options traders are betting the rally is about to cool off.

Shares of AMD were ripping higher Friday afternoon, jumping more than 2 percent, and now up more than 45 percent year to date. However, "Options Action" trader Mike Khouw notes bearish activity in the options market could suggest the rally is coming to a halt.

On Thursday there was a surge of options activity in AMD, with trading volume more than double the average daily amount. Among the activity, Khouw pointed out a block of traders who purchased the June 15 puts for an average of 35 cents per contract.

"So those are basically bearish bets that AMD could be below $14.65 by a week from tomorrow," he said Thursday on CNBC's "Fast Money."

Chip stocks have been among the top performers in the tech rally this year, with the SMH ETF that tracks the group up 12 percent year to date. However, the semiconductor group has recently given back some of its gains and the ETF is now on track to post its first negative week in more than a month.

Shares of AMD are up more than 17 percent in the past year and were trading higher Friday afternoon at around $15.19.