Call Options Or Put Options On Intel (INTC)?

| January 17, 2014 | 0 Comments

Intel OptionsIntel (INTC) is seeing huge action today as the company released fourth quarter earnings after the bell yesterday.  The shares were down over 5% after hours but have regained some ground as of this writing.

INTC shares are sitting at $25.64.  The stock’s up 30% from the 52-week low of $19.72 and is just 5% below the 52-week high of $27.12. 

Is this an opportunity to buy call options on INTC because of a possible overreaction on the part of sellers?  Or should you buy put options on INTC because the company’s fourth quarter earnings report wasn’t as optimistic as expected?

The bulls make a convincing argument…

INTC may have missed some investors’ expectations with its earnings report this week, but the news wasn’t nearly as bad as the stock action makes it seem.

INTC’s EPS was $0.51 for the quarter, compared to expectations of $0.52 – hardly a big miss.  Meanwhile, revenues actually came in higher than expected at $13.8 billion compared to the $13.7 billion expected.

More importantly, PC demand appears to have stabilized after being in a free fall for quite a while.  With revenue from PC chips more predictable, INTC can focus on other/new products and market opportunities.

But the bears have a compelling case as well… 

Focusing on the fourth quarter numbers misses the big picture – Intel expects this year’s revenues to be flat.  How good of a year can the company have if it doesn’t grow revenues?

Even if PC demand has stabilized, what could possibly lie ahead for the market?  After all, consumers have abandoned PCs in droves for tablets and smartphones.  There simply can’t be that much upside left in the industry.

Moreover, INTC’s server chip sales were also slower than expected.  With PC demand much lower than it used to be, and server sales down as well, the company could have a very tough time improving its financials this year.

So is INTC being oversold due to an overreaction by investors, or is the worse than expected 2014 outlook a reason to take a bearish position?

If you think the bulls are right, take a look at buying the INTC February $25 calls for around $1.00.

If you think the bears are right, take a look at buying the INTC February $26 puts for around $0.80.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.