Today, Intel Corporation (INTC) stock is rising, up significantly over the past two weeks. Moreover, a Barchart report shows that several large tranches of options trades in Intel puts and calls have traded. They imply a new bullish sentiment by institutional investors.
INTC is up over 4% in midday trading at $64.86, up significantly from its recent low of $41.19 on March 30. These options trades are likely a result of recent bullish news.
This relates to the news of Intel's collaboration with Elon Musk. This was posted on X, which said it will be part of the new SpaceX and Tesla, Inc. (TSLA) “Terafab” project to produce new chips with its own production facilities.
It's Profitable to Short INTC Puts
I discussed this bullish options activity in an April 8 Barchart article, “Huge, Unusual Intel Put Options Volume - a Bullish INTC Signal.”
That article showed that bullish investors were shorting at-the-money (ATM) puts at the $57 strike price for April 17. Those investors made a $2.32 premium for a 4.07% yield (i.e., $2.32/$57.00).
Today, those $57.00 strike puts are down to just 20 cents. So, this has been a very profitable trade in just 5 days, as INTC has risen well over the ATM strike price.
As a result, those same institutional investors may have rolled their trades into new short put and call trades.
Huge New INTC Trades
This can be seen in today's Barchart Unusual Stock Options Activity Report. It shows two new unusual options trades that are similar to last week's unusual INTC options trades.
The table above shows that almost 85 times the prior number of put contracts outstanding have traded at the $64.00 strike price for expiration on April 17. Similarly, over 33x the prior number of calls have traded for the May 8 expiry $80.00 contract.
The short-put yield for the $64.00 strike price tranche is high: $1.84/$64.00 = 2.875%. Moreover, even if INTC falls to $64.00 by Friday, April 17, the investors shorting these puts make an attractive buy-in:
$64.00-$1.84 = $62.16 breakeven point
Similarly, investors shorting $80.00 calls over the next 25 days to May 8 make a good yield: $1.32/$64.89 = 2.03%. Moreover, even if INTC rises to $80 by May 8, those covered call investors make an attractive capital gain as well:
$80/$64.89 = +23.3%
As a result, their potential total return is over 25%, including the income received.
Downside Play
Note, it's also possible that some of these investors may have shorted the $80.00 calls and then used that income to buy April 17 puts. The net debit cost would be $0.52 (i.e., $1.32-$1.84).
That implies the investment is essentially bearish, implying INTC may fall over the next 5 days to April 18. However, I don't think this is the majority of those who initiated these put trades.
On the one hand, the delta ratio is high, almost 44%, which means that INTC could drop to $64 by Friday. But, the investors shorting those puts may be willing to buy at $64.00 (i.e., upon assignment, after collecting the short-put income) to “cover” the short-call trade at $80 25 days later.
Therefore, the likelihood is high that most of these trades are for investors bullish on INTC stock.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
