Stocks quoted in this article:
Intel (INTC - 32-7/8) has been trading in a firm range between the 30 and 35 strikes since December 14. An analysis of the options open interest configuration on INTC indicates that call sellers at the 35 strike and put sellers at the 30 strike will be extremely happy if this price action continues through January expiration on January 16.
The peak put open interest for INTC resides at the 30 strike, where there is over 67,000 contracts. Those that sold puts to open positions would love to see INTC close above 30 at January expiration. At the same time, there is heavy call open interst at the INTC January 35 strike, where there is over 60,000 contracts. Those that sold 35-strike calls would welcome INTC closing below 35 on January expiration.
If the shares approach 35 as expiration nears, demand for INTC shares could temporarily overcome supply as call sellers hedge their positions by going long INTC stock to offset losses as the calls increase in value. Or, if the shares approach 30 as expiration nears, supply could temporarily overcome demand for INTC stock as put sellers look to hedge their positions by shorting INTC stock.