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Option Trends: Qualcomm and Intel Corporation

Options traders are scooping up calls on QCOM and INTC

by 7/22/2014 12:25:16 PM
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Options traders have set their sights on tech concerns QUALCOMM, Inc. (NASDAQ:QCOM) and Intel Corporation (NASDAQ:INTC) today. Ahead of tomorrow night's turn in the earnings spotlight, QCOM is attracting a fresh crop of option bulls. Calls are also the options of choice on INTC, with speculators rolling the dice on more upside over the next few weeks.


QCOM is slated to report fiscal third-quarter earnings after the close tomorrow. The company has matched or exceeded the Street's bottom-line estimates in six of the past seven quarters, resulting in an average one-week post-earnings gain of 1.5% for the shares.

On the charts, the stock was last seen 2.5% higher at $81.64, and touched a 14-year high of $81.75 earlier in the session. The equity is now on pace to end atop its upper Bollinger Band for just the third time since January.

In the options pits, meanwhile, speculators are gambling on even higher highs for QCOM in the next few months. Call volume is running at five times the average intraday clip, and has outpaced put volume by a margin of nearly 4-to-1. Digging deeper, it appears traders are buying to open the September 85 call, amid hopes for QCOM to surmount $85 by the close on Friday, Sept. 19, when back-month options expire.

The volume-weighted average price (VWAP) of the call is $0.51, making at-expiration breakeven $85.51 (strike plus VWAP). The buyers' profit is theoretically unlimited to the upside, while risk is capped at the initial premium paid for the calls, should QCOM remain south of the strike through expiration. In light of the stock's journey higher, delta on the out-of-the-money call has jumped to 0.27 from 0.14, implying a greater than 1-in-4 shot of expiring in the money.

Intel Corporation (NASDAQ:INTC)

INTC is also advancing this afternoon, with the shares last seen 1.3% higher at $34.50 -- within a stone's throw of the stock's decade-plus high of $34.74 tagged last week. The security has advanced more than 11.5% so far in July, thanks to a post-earnings bull gap on July 16, but is now back beneath its upper Bollinger Band.

In the options arena, INTC calls have outnumbered puts by a margin of nearly 4-to-1 today. Most popular is the August 33 call, where most of the action transpired in a single block of 17,000 contracts, traded at the ask price of $1.63. Plus, implied volatility at the strike is on the rise, suggesting the calls are being purchased to open.

The buyers will reap a reward if INTC is docked atop $34.63 at the close on Friday, Aug. 15, when the options expire. Again, profit potential is theoretically unlimited north of breakeven, while risk is capped at the initial premium paid. Delta on the calls stands at 0.86 -- up from 0.78 at Monday's close -- pointing to a roughly 86% chance of expiring in the money.


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