Intel's Tough Trade Into Its Update

Of course, there's always the question of expectations and sentiment around the stock, which I call the second and third derivatives of trading. The analyst consensus on the Street is already a little bit above the midrange of Intel's previous guidance, though Intel might guide a little above even that consensus.

I'm not sure what the buy side is really looking for tonight. I know a lot of folks who still think Intel has been misleading the Street with recent earnings reports and who expect bad things finally to come to roost. But I also know a lot of buy-siders who are getting longer in the semiconductor names and chatting up the prospects of the inventory problems from last summer finally being cleaned up. They expect the numbers from Intel to reflect those improved fundamentals.

The upshot: Sell-siders expect a slight raise. Buy-siders are divided, with some very bullish and others very bearish. Fundamentals are likely to be strong, but not outrageously so.

Sound like a muddled situation? Look at how Xilinx (XLNX - commentary - Cramer's Take) and Altera (ALTR - commentary - Cramer's Take) and other semi stocks that have issued similar midquarter reports lately have traded: flatlined and boring. Or said differently, muddled.

I've had calls in Intel since the middle of last summer. Though I've sold quite a few of them along the way as they got to expiration, I still hold some that expire in April. I shorted a little common stock against those calls Wednesday, on a ratio of about 1 to 5. That leaves me in a position to profit a lot if the stock continues running higher, but also to lock in some gains and limit my downside if the stock were to collapse for whatever reason. Gun to head, I'd guess the stock will tick up a little bit Friday. Thrilling.

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At time of publication, the firm in which Willard is a partner was net long Intel, although positions can change at any time and without notice.

Cody Willard is a partner in a buy-side firm and a contributor to TheStreet.com's RealMoney. He also produces a premium product for TheStreet.com called The Telecom Connection and is the founder of Teleconomics.com. The firm in which Willard is a partner may, from time to time, have long or short positions in, or buy or sell the securities, or derivatives thereof, of companies mentioned in his columns. None of the information in this column constitutes, or is intended to constitute, a recommendation by Willard of any particular security or trading strategy or a determination by Willard that any security or trading strategy is suitable for any specific person. Willard appreciates your feedback and invites you to send it to [e-mail].