Monday, December 20, 2010

Intel Options Jan 11 - 1

On Decemebr option expiration day, INTC closed within the $20-$22 ($21.46) range established by the December 18 options trades established in November. Hence both option position expiring and both yielded 1+% in a month!

The fundamentals on INTC remain basically the same as before. Technically, it looks like the 50dma is about to cross the 200dma around $20.85 and in general there is some support around that level.

Today I sold the Jan $21 puts for just over $.40 per share after commission (just under 2%). These options do span the potentially more volatile earnings announcement period. Implied vol is only about 21.

Worse case - the stock falls and I am forced to purchase at a net price of $20.60. This is slightly higher than the sub $20 acquisition price of risk capital for option purchases for most of the year but still seems prudent under current conditions. This purchase price would be at about a p/e of 10 the stock would be purchased right before an x-date (around 2/3) so they would quickly capture the dividend.

Best case (i.e. hopped for case) - the stock rises back towards $22 either quickly as managers may want INTC in their year end portfolios or in anticipation of good earnings around 1/13. If the stock does drift back toward $22 prior to earning announcement I would look to cover this option or possibly roll it out to February when a 1% gain is achieved.

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