Intel Options (INTC): Unusual Trading Activity

| April 17, 2012 | 0 Comments

INTC OptionsOptions in mega chipmaker Intel (INTC) are showing massive activity today.

Don’t forget, we’re focusing on heavy activity this week along with upcoming earnings.

And with INTC reporting earnings today after the close, option traders are positioning for a rise in the stock price.

Even though the Nasdaq closed down 23 points or 0.75% yesterday, Intel saw no such weakness.  As a matter of fact, Intel finished yesterday up $0.32 at $28.40 a share.

During yesterday’s trading session, option traders came out in force buying over 2,000 May $28 – $29 call spreads.

Remember, a call spread is an option strategy where one call option is purchased and another is sold at a higher strike price.  This is done to reduce the upfront premium, as well as to cap their risk.

What’s interesting this morning is that option traders are ratcheting it up a notch.  Now they’re coming for the May $29 – $30 call spread.

They aren’t looking for a grand slam, but rather a few base hits.  These call spreads are being purchased for a cost of $0.25 a share.

And with INTC trading higher again today at $28.55, these traders are looking to triple their money by May expiration.  That’s because the maximum profit on a call spread is the difference in the strikes minus the price paid ($1.00-$0.25).

So, what’s behind this bullish call spread?

As most of you know, Intel is the world’s largest chipmaker based on revenue and unit shipments.

The company is also known for its dominant market share in microprocessors for personal computers (PCs).

I think this large call activity is due to analysts’ expectations for upcoming earnings and its recent outperformance in the technology sector.

For one, when we look back at past earnings, INTC has consistently beaten expectations three out of the last four quarters.

And they’re also one of the best cross-marketing companies in the business.  Intel has prominent brand recognition because most PC manufactures show Intel’s logo on all of their products.  In other words, unless you have a MAC, you can’t really look at a computer without seeing the word Intel somewhere on it.

So, as we anxiously await earnings this afternoon, let’s hope options traders are correct and after the close, see some nice profits.

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.