Tuesday, April 17, 2012

Intel Covered Calls Going into Earnings

Intel (INTC) reports earnings after the bell today.   With the stock trading around $28.50, CCI sold one lot of June $30 calls against the portfolio's position for $.41 after commissions.  Several reasons for this activity.
  • As discussed here $30 has been my target price fro awhile. Hence, barring some major change in "the story",  this is a level to lighten-up on the position.
  • The stock has had a nice big run.   Even if it continues higher after positive earnings it seems highly unlikely to run way past $30 in the short term.
  • If Intel misses earnings or it meets earnings and there is a "sell the news" reaction this position will earn about 1.3% in 2 months.  Just adding a small amount of juice to a nice winner, with little real risk.
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FYI, Intel earnings just came out and seem to be slightly above estimates and hence about in-line with expectations.  As seems to be the usual story, the stock is down in the after markets. Hence, at the moment this covered call hedge seems like it will add a little profit to the position.  I plan to look closer at the earnings results and conference call to determine next steps, but generally what look to be solid numbers continues to make me bullish on Intel and hope to see the stock get over $30 with time.

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