Thursday, January 14, 2016

INTC Analysis

Update 1/29/2016: INTC reached 55% of the potential profit and I exited.

Shares declined by 4.5% over 15 days, or a -109% annual rate. The options position produced a 121.4% yield on debit for a +2,955% annual rate.

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

[INTC in Wikipedia]


I shall use the FEB series of options, which trades for the last time 36 days hence, on Feb. 20.


Implied volatility stands at 35%, which is 1.4 times the VIX, a measure of volatility of the S&P 500 index. INTC’s volatility stands in the 90th percentile of its most recent range.

Ranges implied by options and earnings
WeekSD1 68.2%SD2 95%Earns
Implied volatility 1 and 2 standard deviations; maximum earns move

The Trade

INTC has had a tendency over the past year for its price to rise after earnings announcements. It has a positive enthusiasm index of 25% from analysts going into this earnings announcement, with 59% of analysts providing coverage giving a strong-buy recommendation.

On the chart, the price began a downswing on Dec. 30 and bounced back up in a counter-trend correction on Jan. 8.

Iron condor, short the $34 calls and long the $35 calls,
short the $29 puts and long the $28 puts,
sold for a credit and expiring Feb. 21.
Probability of expiring out-of-the-money

The premium is $0.34, which is 34% of the width of the position’s wings. The stock at the time of analysis was priced at $31.81.

The risk/reward ratio is 1.9:1.

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 $1.34, and the average was $0.64. The central tendency, with the maximum and minimum removed, was $0.51.

Decision for My Account

I have entered a position on INTC. I had to lower the premium to $0.31 in order to get filled. The stock price at entry was $32.17, with a risk/reward ratio of 2.2:1.

-- Tim Bovee, Portland, Oregon, Jan. 14, 2016


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

Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading


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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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