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Most Active Options Update: Intel Corporation (INTC)

Long put spreads are being initiated on Intel Corporation ahead of next week's earnings report

by 1/10/2014 2:33 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Intel Corporation (NASDAQ:INTC).


Puts are trading at nearly two times the typical intraday pace on Intel Corporation this afternoon, despite the stock's 1.1% advance to linger near $25.57. A large portion of the activity has centered on two contracts: the January 2014 24- and 25-strike puts. Earlier this morning, several symmetrical blocks of puts changed hands at these strikes across two separate exchanges. The lower-strike puts went off at the bid, translating into a volume-weighted average price (VWAP) of $0.07, while the higher were exchanged at or above the ask, for a VWAP of $0.26. Implied volatility has ticked higher at each leg, hinting at the initiation of new positions.

By implementing the long put spread, the expectation is for INTC to finish at or below the breakeven level of $24.81 (bought strike less the net debit of $0.19) by next Friday's close, which is when the front-month options expire. Ideally, INTC will land right at $24, allowing the trader (or traders, as the case may be) to collect the maximum potential profit of $0.81 (the difference between the two strikes less the net debit) per pair of puts. If INTC remains above $25, the loss is limited to the net debit paid.

The life span of these puts incorporates Intel Corporation's (NASDAQ:INTC) earnings report, which is slated for release after next Thursday's close. Although the company has matched or exceeded analysts' bottom-line estimates in seven of the past eight quarters, the stock has posted an average loss of 0.9% in the subsequent session. For Intel's fourth quarter, Wall Street is projecting a per-share profit of 52 cents -- a 4-cent improvement over its year-ago results.


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