INTC Analysis

Update 11/16/2015: INTC reached 57% of its maximum potential profit as expiration week began, and I exited. 

Shares declined by 0.3% over 35 days, or a -3% annual rate. The options positions produced a 130.8% yield on debit, for a +1,364% annual rate.

---

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

[INTC in Wikipedia]

INTC

I shall use the NOV series of options, which trades for the last time 39 days hence, on Nov. 20.

Ranges

Implied volatility stands at 32%, which is 1.8 times the VIX, a measure of volatility of the S&P 500 index. INTCs volatility stands in the 73rd percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	35.47	38.83	33.45
Lower	28.75	25.39	30.77
Gain/loss	10.5%	20.9%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

I shall use a bearish strategy for INTC, based on analyst expectations for a negative earnings surprise.

Bear call spread, short the $33 calls and long the $34 calls, sold for a credit and expiring Nov. 21.
Probability of expiring out-of-the-money

NOV	Strike	OTM
	33	66.4%

The premium is $0.30, which is 30% of the width of the position’s wing. The stock at the time of entry was priced at $32.10.

The risk/reward ratio is 2.3:1.

The position becomes unprofitable at $0.90 above the stock price. The biggest immediate move after each of the past four earnings announcements was $1.34, and the average was $0.67.

Decision for My Account

I've opened a position on INTC as described above.

-- Tim Bovee, Portland, Oregon, Oct. 13, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

• On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
• On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.