Schaeffer's Trading Floor Blog

Intel Corporation (INTC) Traders Bet On a Breakthrough of Resistance

Calls have been the options of choice on INTC of late

by 9/9/2013 12:03 PM
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Long calls have been growing in popularity on Intel Corporation (NASDAQ:INTC) recently, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In Friday's session alone, traders bought to open 37,357 calls on INTC, compared to 1,389 puts, resulting in a bullishly biased single-day ISE/CBOE/PHLX call/put volume ratio of 26.90.

Unlike a relatively rare appearance by INTC bears last week, this bullish activity is just more of the same. In fact, during the course of the past two weeks, speculators at the ISE, CBOE, and PHLX have purchased (to open) 101,569 INTC calls, versus 33,237 puts. What's more, the corresponding 10-day call/put volume ratio of 3.06 (up from its month-ago reading of 1.84) ranks in the 98th percentile of its annual range. Simply stated, long calls have been initiated over long puts with more rapidity just 2% of the time within the last year.

Meanwhile, more than 245 million Intel shares are sold short -- a level not seen in more than two years. Plus, it would take more than eight sessions to cover these shorted shares, at INTC's average daily pace of trading. With the equity up a modest 6.5% over the past six months, this recent uptick in call volume could also represent shorts picking up some hedges on their bearish bets.

As such, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.89 ranks lower than 65% of similar readings taken in the past year, pointing to a call-skewed trend among short-term option traders. In the front-month series, specifically, this has translated into peak call open interest at the September 23 strike.

Currently, 111,422 contracts rest at this overhead strike, the majority of which have been bought to open. Diving deeper into the data reveals that, at the moment, buyers of the September 23 calls are willing to pay a bit more for this particular bet. Implied volatility at this strike is inflated relative to the stock's 20-day historical (realized) volatility (22% vs. 17.4%), meaning premium is relatively expensive.

From a contrarian perspective, INTC could find itself struggling against the $23 level over the next two weeks. Remember, heavy accumulations of call open interest can often act like a speed bump for a stock, as the contracts begin to unwind ahead of expiration. In fact, although INTC is up 1.1% in today's session to trade at $22.93, the stock's advance is stalling out near its 50-day moving average -- which is located at $22.95. Intel Corporation (NASDAQ:INTC) has not finished a daily close north of this trendline since July 16.

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