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Option Brief: Intel Corporation (NASDAQ:INTC) calls traded at a faster-than-usual pace on Friday, and easily outpaced puts. However, not all of these transactions were of the bullish buy-to-open variety. In fact, the lion's share of the contracts traded at the session's most active option -- the May 27 call -- were sold to open.
Getting into the numbers, close to 15,500 contracts were exchanged at the aforementioned strike, mostly as a single block of 14,445. Nearly all of the volume went off at the bid price, and open interest spiked by 15,136 positions over the weekend, collectively suggesting the INTC calls were indeed written to open.
In a nutshell, Friday's sellers are anticipating that Intel shares will remain south of the strike through the close on Friday, May 16, when the back-month options expire. If that comes to pass, the options will be rendered worthless, and the traders will pocket the entirety of the initial premium collected. However, if INTC rallies north of the strike, the writers may be assigned, and forced to sell the shares for $27 apiece, no matter how much they're worth.
Looking back one year, INTC momentarily spiked north of $27 on Jan. 15, when it hit an annual high of $27.12, before promptly falling back down to earth. As such, delta on the call sits at just 0.26, indicating a roughly 1-in-4 chance of the option expiring in the money. Nevertheless, delta is on the rise this morning, with the stock running 1% higher at $25.88.
Elsewhere, another factor that appears to favor the out-of-the-money call sellers is Intel Corporation's (NASDAQ:INTC) upcoming first-quarter earnings report, slated for the afternoon of Tuesday, April 15. Despite meeting or exceeding analysts' bottom-line estimates in six of the past eight quarters, the shares have averaged a one-week loss of 2.3% following the event.