Options on shares of Intel standout as unusually active in Monday's quiet market.
The spike in volume is most clearly seen in July options where over 34,000 contracts have traded on a $25 put/$27 call strangle.
Reading the tape, traders say that the calls traded on the offer while the puts traded in the middle of the market.
“It seems that this is a trade with a bullish bias,” says Steve Sosnick, Timber Hill Equity Risk Manager. “Somebody is betting that things are going to get a little more exciting.” The cost to buy the strangle is about $2.40 with an implied volatility of about 22 percent.
Sosnick also notes that the trade was executed on the International Securities Exchange (ISE), an all-electronic options exchange. Traders can try to interpret the clues on the tape but there is no floor—and no floor traders associated with that exchange, making it tougher to decipher exactly what happened and why.
While there was no major news on Intel stock today, two companies published analyst reports according to StreetInsider.com. UBS reiterated a “buy” and raised its price target to $34.00 from $31.00. Maxim Group initiated coverage of the stock at a “buy” with a price target of $33.00.
At an implied volatility of about 22 percent, the strangle was cheap relative to historic volatility for Intel . Six month historic volatility for the underlying shares is about 30 percent over the past six months and 28 percent over the past three months according to Amyn Bharwani, J.P. Morgan Securities U.S. Equity Derivatives Strategist.
Traders say that the buyer might be looking for some kind of movement on or before the company’s next earnings cycle. In the last quarter, the stock jumped about 2.25 percent during the period around the company’s quarterly earnings report.
The company is expected to report its next quarterly earnings on April 17, after the close of trading.
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