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Short-Term Intel Corporation (INTC) Trader Makes a High-Risk Bet

One trader is employing a short straddle on Intel Corporation (INTC)

by 4/29/2014 2:36 PM
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Intel Corporation (NASDAQ:INTC) calls are trading at more than twice the pace of puts this afternoon. The session's biggest trade involving INTC options, however, comprises an equal number of both. Specifically, one speculator is gambling that the tech stock will remain near current levels through the closing bell next Friday, May 9.

Diving into the details, earlier this afternoon, matching blocks of 19,900 contracts traded at the weekly 5/9 26.50 call and put. Each of the lots crossed below the bid price, suggesting they were sold, and volume outstrips open interest at both strikes, conveying the creation of new short positions. Data from Trade-Alert confirms this hypothesis, as well. In other words, the trader is employing a short straddle, expecting minimal volatility from INTC over the next eight-plus sessions until expiration.

The positions were opened for a net credit of $0.62 per pair of contracts -- $0.20 for each call plus $0.42 for each put -- which computes to roughly $1.2 million total ($0.62 credit * 19,900 contracts * 100 shares per contract). This represents the maximum potential profit for the seller, should INTC be trading exactly at $26.50 when the markets close next Friday. Meanwhile, the two respective breakeven points for the trade are $27.12 (strike plus net credit) and $25.88 (strike less net credit), with potential losses accruing north of the former and south of the latter.

Technically speaking, Intel Corporation (NASDAQ:INTC) hasn't moved much over the last year, gaining just over 11% to trade at $26.50. Also, since the beginning of April, the shares have largely traded in the $26-to-$27 range -- profitable territory for today's option seller.


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