Short-Term Option Bull Takes Aim at Intel Corporation (INTC)

Intel Corporation (INTC) is rallying after Nomura Securities waxed optimistic on the semiconductor stock

by Alex Eppstein

Published on Jun 13, 2016 at 11:44 AM
Updated on Jun 24, 2020 at 10:16 AM

Intel Corporation (NASDAQ:INTC) scored a major victory last Friday when it inked a deal with Apple Inc. (NASDAQ:AAPL), and the semiconductor stock continues to feel the effects. At last check, INTC has added 1.3% at $32.46. Meanwhile, options traders are seemingly wagering on even more upside through week's end.

Currently, INTC call options are being exchanged at double the normal intraday rate, with the July 33 strike outpacing the competition, with more than 11,000 contracts on the tape. Over half of these were likely bought to open out of the gate, in a sweep of 6,585 contracts. To purchase these fresh out-of-the-money positions, the options trader forked out over $300,000 ($0.47 premium paid * number of contracts * 100 shares per contract) -- which also represents his maximum potential risk, should the calls expire out of the money at the close on Friday, July 15.

These bullish bets were likely picked up at a relative bargain. Right now, INTC's Schaeffer's Volatility Index (SVI) of 20% ranks in the low 11th percentile of its annual range. In other words, the options market is pricing in relatively muted short-term volatility expectations at the moment.

Potentially sparking the call buying could be last week's AAPL deal -- or, perhaps, a note published by Nomura Securities over the weekend. After meeting with INTC CEO Brian Krzanich last week, the brokerage firm said it believes the stock has "limited downside," and added the shares are already trading at a discount relative to other semiconductor stocks.

Nomura is hardly the only brokerage firm with high hopes for INTC. Twenty-one of 33 analysts tracking the stock rate it a "buy" or better, and the consensus 12-month price target of $35.49 lingers near annual-high territory.

Technically speaking, Intel Corporation (NASDAQ:INTC) has been a mixed bag in 2016. Year-to-date, the semiconductor stock has lost nearly 6%. However, the shares have been on a tear since bottoming in February, just below $28 -- advancing over 17% in a roughly four-month time span.

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