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Intel Corporation (INTC) Put Buyers Bet On a Quick Move South

Short-term traders see Intel Corporation shares breaching technical support

by 5/7/2014 10:49 AM
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Intel Corporation (NASDAQ:INTC) calls outpaced puts during yesterday's slower-than-usual session. However, the microchip maker's most active strike was on the put side of the aisle, as traders gambled on short-term downside for the shares.

Specifically, 5,259 contracts -- including a block of 1,156 -- changed hands at the near-the-money May 26 put. Roughly two-thirds did so at the ask price, implied volatility edged higher, and open interest tacked on more than 4,700 contracts overnight, collectively hinting at buy-to-open activity.

The traders are aiming for INTC to drop below $26 from its current perch at $26.28 by the close on Friday, May 16, when front-month options expire. In order to do so, the stock will need to breach its rising 40-day moving average -- currently lodged at $26.02 -- which contained a gap lower on Monday and could continue to act as support moving forward. However, even if Intel shares remain above the strike through the option's lifetime, the most the put buyers stand to lose is the initial premium paid. Based on the equity's Schaeffer's Volatility Index (SVI) of 16%, which is just 4 percentage points from a 52-week low, this is a relatively modest sum.

Yesterday's Intel Corporation (NASDAQ:INTC) put buying echoed a recent trend in the stock's options pits. During the last two weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security has racked up a put/call volume ratio of 0.82 -- up from 0.57 a week ago. What's more, the current reading ranks higher than 82% of comparable metrics from the last year, signaling a stronger-than-usual preference for long puts over calls in recent sessions.


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