Intel is set to report earnings on Thursday afternoon.
Todd Gordon, founder of TradingAnalysis.com, is bullish on the long side ahead of the earnings print as it attempts to break above long-term resistance.
"We're seeing incredible strength just continue to play out in the chip space. I think Intel is set up for a pretty good trade on the long side. As you look at the chart, you can see that Intel is knocking on this $60 to $61 door here. We tried several times in 2018, early goings in 2019 and here we go in 2020, and it looks like we're trying to break up through that resistance level," Gordon said Tuesday on CNBC's "Trading Nation."
However, as the stock heads into earnings, implied volatility makes for expensive options prices, he says.
"The IV is moving up … very typical and to be expected right around earnings. Inevitably what happens after earnings are released is the implied volatility drops," said Gordon. "Options essentially get more expensive as you head into earnings because the likelihood of an outsized move is large. … I'd like to express a long bias here as we continue up through this $60 resistance level, but I want to express that bullish bias by selling these overly priced options."
Gordon is opting to buy a put spread to offset the cost of the options. He is selling the Jan. 24 expiration $61 put and buying the Jan. 24 expiration $58 put. This trade makes the most profit if it expires within that range. Shares are currently trading at $62.15.
