Ahead of its first midquarter business outlook update on Thursday, chip-making heavyweight
was in the spotlight as investors were quick to buy call
options. A call option provides the holder with the right, but not the obligation, to buy stock at a fixed price by a certain date, known as expiration.
Tomorrow's meeting is the subject of controversy because analysts have given varying opinions on what to expect from the company. On Monday,
said in a research note, "We don't see how the news can be good. ... We believe that Intel will not break its prior guidance range, but we could see cutting off the top half of the range. Despite the lack of PC market follow-through, Intel's stock is among our favorites in the chip sector."
today said, "We think that hitting the low end of the $6.2 billion to $6.8 billion Q2 range that Intel has set for itself will be tough."
The Intel June 30 calls traded about 45,000 contracts on open interest, or the number of contracts outstanding, of 51,170. The premium, or price of the option, has ranged from $1.15 ($115 per 100) to $1.35 ($135 per 100). The near-the-money (when the share price is close to the strike price) July options also showed increased interest in Intel. The July 30 calls traded roughly 13,500 contracts on open interest of 42,953. Premiums on those calls ranged anywhere from $1.85 ($185 per 100) to $2.35 ($235 per 100). Intel shares recently were up 59 cents, or 2%, at $30.32.
According to one floor trader, the activity in Intel was mostly due to institutional trades in which the customers bought the calls outright. However, he said he wasn't certain if they intended to close out their positions or whether they were betting on a pop in the share price. He expects a slight warning from tomorrow's conference call, but nothing dramatic.
Mike Schwartz, strategist with
CIBC World Markets
in New York, said that investors are optimistic about the stock because they believe most of the bad news is already priced into the market. Considering Intel has an
assortment of issues, buying the near-term call options outright offers a way to make a speculative bet on the stock if an investor thinks it's ready for an uptick. In addition, if the stock doesn't move above the desired price, the investor is out only the cost of the premium.