Wednesday, July 15, 2015

INTC Analysis

Update 8/21/2015: The INTC position in the money to the downside zone with only 45 minutes left to trade before expiration, creating a risk that I would end  up with short shares of the stock dumped into my account upon assignment. I exited the position for a profit.

The shares declined by 10.1% over 37 days, or a -100% annual rate. The options produced a 92.0% yield on debit, for a +908% annual rate

The semiconductor manufacturer Intel Corp. (INTC), headquartered in Santa Clara, California, publishes earnings on Wednesday after the closing bell.

[INTC in Wikipedia]



Click on chart to enlarge.
INTC at 10:23 a.m. New York time, 30 days hourly bars
Implied volatility stands at 30.9%, which is 2.3 times the VIX, a measure of volatility of the S&P 500 index. INTC’s volatility stands in the 76th percentile of its most recent rise.

I shall use the AUG monthly series of options, which trades for the last time 37 days hence, on Aug. 21.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

The maximum earnings movement range is relatively wide, and the only way to put most of it in the zone of maximum profit is to construct a strangle, which lacks hedging and therefore has a potentially unlimited loss.

Strangle, short the $32 calls and long the $27 puts,
sold for a credit and expiring Aug. 22
Probability of expiring out-of-the-money


The premium is $0.48. The stock at the time of purchase was priced at $29.81.

The zone of profit in the proposed trade covers a $2.50 move either way. The biggest immediate move after each of the past four earnings announcements was $2.94, and the average was $1.35.

Decision for My Account

I've opened a position in INTC has described above.

-- Tim Bovee, Portland, Oregon, July 15, 2015


My volatility trading rules can be read here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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