Update: INTC: Low Premium Short Term Bearish Trade

by Dan September 6, 2011 9:51 am • Commentary

Update Sept 6th 2011: I bought this spread when the stock was 19.80, now the stock is 19.20 and the spread is worth more than double what I paid for it…I also bought some of the Sept19 weekly puts outright and now am selling some for almost double what I paid….I am taking premium that I paid off the table and now I can’t lose on almost 2/3 of the original position that I have left.




Original Post Fri Sept 2nd, 2011: INTC: Low Premium Short Term Bearish Trade

INTC in a lot of ways has had an ok year….the stock is down about 6% ytd tracking the Nasdaq, but still down 17% from the highs made in Spring. A few years back the company did away with their mid quarter update process, but has routinely pre-announced…..Last year the company pre-announced a negative Q3 with a month left in the quarter, essentially this week…..TXN holds its mid quarter update Thursday after the close and by all accounts their end markets (more focused on mobile than pc’s like INTC) kind of stunk….BUT DELL and HPQ told us just a couple weeks ago that PCs stunk….

I think there is a good chance given environment that we are in that orders fell off a cliff for INTC and AUG and that Q3 tracking very poorly and that they could very likely pre-announce negatively this coming week.

TRADE: INTC ($19.80) BUY Sept9 (weekly)  19/18 Put Spread for .08

-Buy Sept9th 19 Put for .11

-Sell Sept9th 18 Put at .03

Break-Even on Sept9 weekly expiration):

Profit: btwn 18.92 and 18 make up to .92, below 18 make full 92

Loses: Btwn 18.92 and 19 lose up to .08, above 19 lose all .08 premium

TRADE RATIONALE: Ok this is a but Pikey, but obviously this is a shot in the dark whether they pre-announce or not but I am willing to define my risk in a effort to take a shot as all singles point to a disappointing quarter.  Many would argue against selling the 18 put at .03 but the likelihood of that option being dramatically in the money are extremely small.  Additionally, you could just buy the Sept9 19 Puts for .11 or .12 and leg into the put spread if the stock continues to decline.