INTC Analysis

Update 10/13/2016: INTC fell with the market,moving back into its zone of profit. I exited as the options approached expiration.

Shares declined by -2.7% over 29 days, or a -34.2% annual rate. The options position produced a +20.8% yield on debit for a +262% annual rate

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The semiconductor manufacturer Intel Corp. (INTC), headquartered in Santa Clara, California, has implied volatility in the upper half of its one-year range and qualifies for a full analysis.

[INTC in Wikipedia]

INTC

I shall use the OCT series of options, which trades for the last time 37 days hence, on Oct. 21.

Ranges

Implied volatility stands at 28%, which is 1.7 times the VIX, a measure of volatility of the S&P 500 index. INTC’s volatility stands in the 50th percentile of its annual range. The price used for analysis was $35.60

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	38.80	42.00	N/A
Lower	32.39	29.19	N/A
Gain/loss	±$3.20	±$6.41

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

INTC has been zig-zagging sideways between roughly $28 and $38 since peaking in December 2014.
It is presently off of its most recent reversal, which began Sept. 8.

Volatility Trading by Euan Sinclair

Zacks Investment Research gives INTC a neutral ranking.

Brokerages in aggregate give INTC a 25% enthusiasm rating, with 63% of 32 analysts issuing strong buy recommendations.

The chart near term has a bearish cast but the Street is bullish. I'll use a direction-neutral strategy in building a trade.

Iron condor, short the $38 calls and long the $39 calls,
short the $33 puts and long the $32 puts,
sold for a credit and expiring Oct. 22.
Probability of expiring out-of-the-money

OCT	Strike	OTM
Upper	38	81.6%
Lower	33	77.4%

The premium is $0.29, which is 29% of the width of the position’s wings.

The risk/reward ratio is 2.5:1.

The zone of profit in the proposed trade covers a $3 move either way.

Decision for My Account

I entered a position on INTC as described above. The stock at the time of entry was priced at $35.67.

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

References

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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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



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Based on a work at www.timbovee.com.