Tuesday, April 19, 2016

INTC Analysis

Update 4/29/2016: INTC fell to 50% below its break-even point and I exited for a loss.

Share drifted sideways with a slight downward tilt after earnings were published but took a sharper decline to the downside this morning.

Shares declined by 2.4% over 10 days, or a -88% annual rate. The options position produced a 37.3% loss on debit for a -1,360% annual rate.

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

[INTC in Wikipedia]


I shall use the MAY series of options, which trades for the last time 31 days hence, on May 20.


Implied volatility stands at 31%, which is 2.3 times the VIX, a measure of volatility of the S&P 500 index. INTC’s volatility stands at the peak of its most recent range. The price used for analysis was $31.60.

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

A book from my library →

The Trade

INTC in December 2015 attained its high point since the tech bubble collapsed in 2000. It then began a zig-zag: A decline that ended on Feb. 11, a rise ending March 30, and then a slight decline from that high that has not yet resolved itself into a srong directional trend but appears to be tending to the downside.

The stock price has closed higher immediately after  three of the last four the first post-earnings trading sessions.

Brokerages in aggregate give INTC a 35% enthusiasm rating, with 65% of 34 analysts issuing strong buy recommendations.

The recent twitch downward in the price isn't enough, in my mind, to negate the uptrend, especially in light of the highly positive opinion of brokers and their analysts. I shall structure the trade as a bull position.

Bull put spread, short the $30 puts and long the $31 puts,
sold for a credit and expiring May 21.
Probability of expiring out-of-the-money
The premium is $0.32, which is 32% of the width of the position’s wings. The stock at time of entry was priced at $31.54.

The risk/reward ratio is 2.1:1.

The zone of profit in the proposed trade covers a $0 move either way. The biggest immediate move after each of the past four earnings announcements was $1.34, and the average was $0.77. After eliminating the maximum and minimum post-earnings movements, the core tendency is $1.05.

Decision for My Account

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

-- Tim Bovee, Portland, Oregon, April 19, 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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Based on a work at www.timbovee.com.

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