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The shares of Intel Corporation (NASDAQ:INTC) are down 0.9% at $23.83, bringing their week-to-date loss to nearly 0.9%. What's more, the stock is in danger of ending beneath both its 10-day and 20-day moving averages -- which just made a bearish cross -- for the first time since mid-April. Nevertheless, option traders today are gambling on an intermediate-term recovery for INTC.
Jumping right in, the out-of-the-money August 26 call has seen close to 6,300 contracts change hands -- 90% at the ask price, suggesting they were bought. Furthermore, volume has exceeded open interest at the strike, underscoring our suspicions of newly added bullish bets -- a change of pace from yesterday.
By purchasing the calls at a volume-weighted average price (VWAP) of $0.25, the buyers will make money if Intel topples $26.25 (strike price plus VWAP) within the next couple of months. From current levels, it would take a rally of around 10.2% in order for the stock to hit breakeven. Risk, meanwhile, is capped at the initial cash outlay, should INTC remain south of the strike through the close on Friday, Aug. 16.
As alluded to earlier, Intel would need to climb back atop its 10-day in 20-day moving averages in order for today's option bulls to reap a reward. From an even longer-term standpoint, the security is staring up at its 20-month trendline, which is stagnating in the $24 neighborhood. This moving average hasn't been conquered on a monthly closing basis since August 2012, and could once again smack INTC lower.