2 Key Events Drive Premium Selling On Intel Corporation (INTC)

With earnings and its investor day on the near horizon, options sellers have set their sights on Intel Corporation (INTC)

Jan 12, 2017 at 1:38 PM
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Intel Corporation (NASDAQ:INTC) has been targeted by premium sellers in recent weeks, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the past 10 sessions, options traders have sold to open 3.81 calls for each one they've purchased. This action is not been relegated to call players, though, considering 4.42 INTC short puts have been initiated in the last two weeks for each long one.

Drilling down, the majority of the action appears to be part of a three-way transaction that occurred on Wednesday, Jan. 4. Per Trade-Alert, one speculator last week sold to open a block of 20,000 weekly 2/10 33.50-strike puts to help fund the purchase of a long call spread using symmetrical 30,000-contract blocks of INTC's weekly 2/10 38- and 40-strike calls.

Open interest translations at each of these strikes support this theory, suggesting the speculator expects INTC to jump north of $38 by the close on Friday, Feb. 10, when the weekly series expires. This time frame that includes Intel's after-the-close earnings report on Friday, Jan. 26, as well as its annual investor day on Thursday, Feb. 9 -- two events that could lead to volatile trading.

In fact, heightened volatility expectations are currently being priced into INTC's near-term contracts ahead of these two key events -- per the stock's 30-day at-the-money implied volatility reading of 24.6%, which ranks in the 71st annual percentile. What's more, this metric settled at a more elevated 25.8% on Jan. 4, when the spread strategist sold premium at the short-term weekly 2/10 33.50-strike put and 40-strike call to offset the cost to buy the weekly 2/10 38-strike call.

Looking at the charts, shares of Intel Corporation (NASDAQ:INTC) have put in an impressive performance over the past 12 months, up nearly 15% to trade at $36.65. And while the stock is pulling back today amid a broader retreat among chipmakers -- after Gartner reported a fifth straight annual decline in global PC shipments -- INTC has found a reliable foothold in the $36.40-$36.50 neighborhood, a region that corresponds to its early September highs, and has served as a firm layer of support since mid-December.

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