INTC is having an awful week. The stock market via the Trade Dispute with China is starting to take on the proportions of the Galactic Trade Federation conflict in Star Wars. Which character Trump or Xi plays depends on which side of the aisle you sit on. The market is short term weak for sure but only down a few percentage points from the top. INTC on the other had is down near 20% from the top. There must be something to do there.
INTC IV is high but not too high
Normally after earnings INTC IV retreats to year lows. If one ever wants to buy juice, a few days after earnings is a pretty good time to look. Right now, all of the short term IV in INTC is pretty expensive in the mid-30s. The problem is short term realized volatility is even higher with 10 day volatility around 48%. Bad earnings report is not helping INTC at all and the ham handed conference calls are not helping either. That sets up a trade where realized volatility is higher and implied volatility is also high.
Own near the money and sell out of the money
Our Edge Hunter sheets help in structuring trades based on several volatility relationships. In the snap below from our Butterfly (BF) sheet INTC May31 44 puts show a very high relative value. If one wants to just sell those puts to pick up INTC shares it is a decent trade. Another Edge Hunter Sheet, VBS, shows IV in INTC cheap relative to the current realized volatility. That means INTC is well within range to scrape $44.
Ratio Trading comes in handy
With realized volatility high it makes sense to buy options nearer the money and sell the relatively expensive stuff more OTM. THE INTC May31 47/44 1 x 2 put spread looks interesting if you don’t mind owning the stock around $41.
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