Sizing Up INTC
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Intel (INTC) is up $0.20 to $23.64 today, helping both the Dow and the NASDAQ, Monday morning and has now rallied 7.6% so far in September. Shares of the world's largest chipmaker performed well late last week after a Jefferies analyst upgraded the stock to Buy from Hold. However, the bullish sentiment in INTC is far from unanimous, as recent earnings results have disappointed and the company's core PC markets have begun to decelerate.
One options player made a big bet against INTC and opened a hefty put spread on the chipmaker Friday. With the stock moving up $0.81 to $23.44 on the day, the investor bought 50,000 October 22 puts on INTC for $0.24 and sold 50,000 October 20 puts at $0.06. The October 20 - 22 put spread, for $0.18, was an opening position, according to today's open interest numbers.
The new position seems to be expressing a very bearish view on the stock for the next few weeks. The October 20 and 22 puts are now the largest blocks of open interest in the name. The downside breakeven to the spread through the expiration is at $21.82, or a 7% drop over the next 32 days. The potential profit is $1.82 if shares plunge 14.7% and fall below the $20 strike.
It's not clear what motivated the unusually large spread in INTC Friday. Bernstein analysts had a cautious note on the stock late last month noting a slowdown in the company's core PC markets amid an ongoing shift in the definition of "computing devises." Now, the bearish options activity comes ahead of earnings, expected around October 15th. Some investors are possibly concerned that the company will again disappoint, as it has in three of the past four quarters (see table above). In other words, the big put spread is expressing skepticism that INTC can live up to the recent hype that is driving the 7.6% month-to-date rebound in the stock price.
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