Event: INTC reports its Q3 earnings today . The options market is implying about a 6% one day move, which is slightly above both the 4 qtr avg of about 3.5%, and the 8 qtr avg of about 3.25%.
Sentiment: Wall Street analysts are neutral on the stock, with 22 buys, 25 holds, and 5 sells, and an average 12 month price target of around $35. Even with the recent weakness in the semiconductor sector, INTC is still up 25% year-to-date. Short interest is at a 2 year low, around 2.5% of the float.
Options Open Interest: Total open interest is essentially evenly split between puts and calls, with a call to put ratio of 1.05 to 1. The 1 month average volume has also favored calls over puts, by a ratio of 1.1 to 1.
In short-dated options, the Oct18th 33 calls and the Oct18th 33 puts both have around 70k of open interest. The Jan15 30 and 37 calls both have over 80k of total open interest, the most among all maturities.
Price Action / Technicals: INTC moved well below its 50 day moving average last week for the first time since early in the year:
Volatility has really picked up in the past month. Last week’s decline in the stock was partly a result of a couple of sector warnings from AMD and MCHP. The $34 level is the spot to watch on the upside, while the the low of the past 2 days was around $31.50. The rising 200 day moving average is now around $29, with $30 the obvious psychological level ahead of there.
Volatility: Implied volatility has ramped in the past month to a new 2 year high:
Options prices are very elevated, so options traders need to take into account the potential impact of volatility compressing after today’s earnings event. However, the overall market volatility likely keeps implied volatility in the low to mid-20’s at a minimum.
Our View: INTC is a key stock for both the tech sector and the broader market. Along with AAPL, MSFT, GILD, and FB, INTC is one of the mega cap stocks that has carried the Nasdaq 100 index in 2014. The stock’s abrupt selloff last week has led to much higher options pricing, and a higher than usual implied move of 6% for the event. We don’t have a strong view on INTC fundamentally, but are taking a look at SMH options for a Name That Trade post later today.