Intel, Corp. (INTC), Trending Stock Report

Intel, Corp. (INTC), is a basket case that is not very pretty. But the basket is so cheap that value seekers are making moves to either acquire INTC outright, or to invest billions with the company. Qualcomm (QCOM) a major chip designer, is thought to be looking at acquiring INTC, while Apollo Global Management, an alternative investment company, is contemplating a strategic investment. Bottom line, both see value in INTC shares at these low prices.

From an options trader’s perspective, we can piggyback the expectations of these two potential offers using options strategies. The good news is that with options we can do it with less risk. The two companies offering to invest in INTC must believe that the former global leader in computer chip making offer deep value.

On the other hand, the options are a bit too expensive to buy. So, we will use option selling strategies to reduce the cost of our acquisition offer.

This Volatility Term Structure chart for INTC shows us the implied volatility for the at-the-money options for each expiration. This chart shows that volatility expectations are inverted. That is, shorter-term options are more expensive than longer-term options. Going to the October 18^th expiration gives us the shortest term with the best liquidity. We will use this expiration because it gives us the best chance to get filled at the price we want.

This MDM graph compares the modeled expected distribution for future stock prices (the orange line) with the actual distribution of INTC’s share prices over the past year (the blue histogram). You can see that the actual stock movement shows that the stock does not make big moves as frequently as current options prices expect. This means options that expire on October 18^th are more expensive than they should be if the stock continues to behave the way it did over the last year.

This Volatility Cone chart for INTC compares implied volatility expectations for each term to the historical volatility for that same term. The blue line shows the average historical volatility, the purple lines show each HV measure’s highest high and the lowest low over the past year. You can see that the one-month term (which is the term we are interested in) is below the one-year historical average. This confirms that the options for that term are relatively expensive.

INTC is trending in the news because value players believe the company’s share price is so cheap that strategic investments amounting to billions of dollars are warranted.

While the stock price may be cheap enough to be attractive for value investors, the options prices are relatively expensive. We can mimic the expectations of these investors. But with option selling strategies, we can do it with lower risk.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea.