Intel shares fell 4 percent Thursday after the chip maker reduced its outlook, and the sudden move lower has created an instant windfall for one or more options traders who made exceptionally well-timed bets earlier this week.
On Monday, on seemingly little news, traders made a series of bearish bets that would only pay off if Intel's stock took a sharp, short-term dive. Many of the options purchased have more than doubled in value in just a matter of days.
"The put buying on Monday was curious," said Dan Nathan, a CNBC contributor who first wrote about the flurry of activity on his blog, RiskReversal.com.
"The choice of expiration in March and April 2nd weeklies captures no scheduled events. They were just making bearish bets," he told CNBC.
Specifically, on Monday, 12,000 of the March 32.50-strike puts, 11,000 of the March 31.50-strike puts and an additional 8,000 April 2 weekly 32-strike puts traded hands.
The largest single block of the day was a purchase of 4,000 March 31.50-strike puts, for 22 cents per share. With Intel's 4 percent decline, those puts were trading for 72 cents Thursday afternoon. Since each options contract controls 100 shares of stock, that single trade alone has generated $200,000 in profits in less than three trading days.
The short-dated nature of these put contracts suggest whoever made the trade had a strong level of conviction that bad news was soon approaching.
"This is a fairly big trade playing for a short-term fall," said Nathan. "Some traders were speculating on bad news, and they clearly got it right."
But some industry experts say that Intel's lowered outlook should not have come as a total surprise.
"There's been a number of negative data points out of the PC supply chain," said Deepon Nag, an analyst who covers Intel for Macquarie Research (and has a neutral rating on the stock). "Taiwanese notebook makers have also reported weak sales recently."
Microsoft, for one, warned of a soft PC environment when it reported earnings in January.
Nag also noted that Intel's quiet period starts Friday, meaning that if the company were to report any negative news before its April earnings, this would likely be the week. In December 2008, Intel stopping holding mid-quarter guidance.
"Intel's quite period starts tomorrow, so this was going this would be the week where you'd make a bearish bet," Nag said.