On Wednesday we previewed Intel’s (INTC) Q4 earnings. Here were some of our thoughts:
While management will go out of their way to highlight future diversification from PC chips, in Q3 their were few segments that one would say are experiencing hyper growth
only 20% of their sales come from North America, and about 60% come from Asia, the company’s guidance could include caution regarding impact of dollar strength on margins and the potential for uncertainty in emerging markets to pick up in the first half of 2016.
From purely a technical standpoint, the chart looks recently like a slow moving trainwreck with a break below long term support at $34, which also corresponds with the steep uptrend from the August lows
I want to play for an inline to slightly disappointing Q4, with muted forward guidance which in this market will be a FAIL. Near the money short dated puts look dollar cheap to me.
And here was the trade we used to express those thoughts:
*Trade: INTC ($32.30) Buy to open Jan15th 32 puts for .65 cents
The major caveat on this trade was that it was binary. With only one day until expiration it had a high probability of being worthless. I needed to get a lot things right in a short period of time to just break-even, first and foremost direction and magnitude of the move. That’s exactly what happened as last night the company reported a Q4 beat, but as we suspected they might, issued worse than expected guidance. The stock is down 8.5% on the open, we are going to take the quick profit:
Action: Sold to Close INTC ($30) Jan15th 32 puts at $2 for a $1.35 gain
This was a risky trade but it fit well with our current worldview. We don’t do a lot of these types of trades but it’s nice when we do and they work.