Trade Update July 12th, 2012 at 9:55am: With INTC down about 7.5% since initiating this tight $1 wide July put spread last week, and then selling half Tuesday for more than a double I am going to sell the 2nd half of the position at .70 (stock ref 24.80) for almost 4x what I paid for the spread. So my average sale price is .56, or about 3x what I paid. With earnings next week I am now risking .70 to make .30, I think I will take the money and run and look for a better re-entry point, possibly with a longer dated structure.
ACTION: Sold 2nd Half of the July 26/25 Put Spread at .70 (stock ref 24.78) My avg sale price was .56 or 3x what I paid last week.
Trade Update July 10th, 2012 at 11:14am: AMD pre-announced weaker revenues for the second quarter last night and the stock is down about 10% this morning citing weaker Chinese and European sales. AMAT, who makes semi equipment, and a huge supplier to INTC also cut its forecast for the year this morning and the stock is down about 2%. Oddly, INTC had a delayed reaction to this news, or investors just didn’t care, more focused on the fact that the stock trades at 10x earning and has a 3.5% dividend yield.
With INTC now playing a bit of catch up to its semi peers, and the stock down about 2% on the day, I am going to sell the July Put Spread that I Paid .18 for at .42 (stock ref 25.65) or more than a double for a .24 profit. I will let the other half ride now, and I can’t lose on the position.
ACTION: Sold Half of the July 26/25 Put Spread at .42 (stock ref $25.85)
It’s tough short a name like this at 10x earnings, but if you do you have to have conviction that they are poorly positioned for the new mobile computing world, I kind of do, but will continue to do work on the them.
Original Post July 3rd, 2012: New Trade INTC: Tablet Cannibalization is Coming, Some Chip Makers May Be Left Out in the Cold
When INTC reported their Q1 results in mid April the company guided down for Q2, specifically, gross margins from 64% to about 62%. Company kept their guidance in place for the balance of the year, and the real question heading into the company’s July 17th, Q2 conf call will be whether or not they were conservative enough for the balance of 2012.
Wall Street analysts are very mixed on the stock with 27 Buys, 25 Holds and 4 Sells even as the stock shows relative out-performance (up ~10.5% on the year) to both the SPX and the SOX, up 9% and 6.5% respectively. I assume the 3.3% dividend yield has something to do with it, as it is viewed a bit more defensive than some other higher beta names in the space.
I am going to do a deeper dive on the name as we get closer to earnings, But with the stock up, and vols in, I wanted to look for a slightly cheeky way to make a near term bearish bet in front of earnings. With all of these new tablets coming to market from the likes of MSFT and GOOG, I want to get a better sense for what margins on cpu’s going into tablets vs PCs ,really looks like and who is best positioned to absorb slowing PCs sales as tablets make inraods. I suspect that INTC might have been caught flat footed as they have very few design wins as of yet in the tablet space…..
This is not THE trade in INTC for the summer, but this one gives me a little exposure with defined risk for the time being.
TRADE: INTC ($26.82) Bought the July 26/25 Put Spread for .18
- Bought 1 July 26 Put for .32
- Sold 1 July 25 Put at .14
Break-Even on July Expiration:
Profits btwn 25.82 and 25, make up to .82, max gain 25 or below of .82 or 4x your money.
Losses of up to .18 btwn 25.82 and 26, max loss of .18 above $26.