Institutional Buyers Make INTC Option Spread Interesting
Here is the Dollar-Weighted Call Versus Put figures for Intel Corp.
(
INTC |
Quote |
Chart |
News |
PowerRating):
Note the positive call-to-put
volume as well as our more telling dollar-weighted call-to-put ratio.
Additionally, we looked at which series the buyers were focusing on. Feb 30 and 32
1/2 call volumes exceeded 1800 contracts apiece by 11:30 CST, but the
real story is the Feb 35 call accumulation, which shows 12,000 calls trading for
about 1 3/8 versus only 100 Feb 35 puts. The AMEX option specialist seems to
have attracted the bulk of that call buying, with two large 3000-plus contract
prints hitting the tape about 11:16 EST.
With INTC trading at $33, it seems likely that some institutional buyer was
looking at the possibility of INTC breaking through its 50-day moving average at
$35.90 and pressing into the mid 40s.
That might be a good bet for a money manager, but for most investors, a
position with a little more time to be right may be a better bet. A position
like
buying the INTC APR 32 1/2 – 40 bull call spread for 2 7/8. The APR 32
1/2 calls are offered for 4 5/8, while the APR 40 calls can be sold for 1 3/4.
Intrinsically, the 32 1/2 calls are worth 50 cents, so only 2 3/8 of the spread
represents extrinsic option premium.
If INTC breaks above the 50-day MA ($35.90) the spread would have an intrinsic
value of $3.40 (35.90 — 32 1/2 = 3.40). If INTC finishes at $38.25 or better,
it is a 100% on the 2 7/8 investment. Keep in mind that’s only asking INTC
to rally 17% over the next three months.
Here are today’s Real-time Index Volatility readings:
