This is a Guest Blog from CNBC Contributor Brian Stutland.
On Friday, shares of Intel rose about 1% to $22, and the stock saw heavy option trading ahead of earnings this Thursday. The biggest trade of the day was the purchase of 60,000 January 2014 20-strike puts for $1.63 each. The trader did this with the stock at $21.95, and it is a bearish trade that will profit if Intel is below $18.37, or 16% lower, a year from now.
This position likely hedges a stock holding, and will effectively stop the trader out on the losses suffered on 6,000,000 shares if the stock dives below $18.37.
Intel is projected to report Earnings Per Share of $0.45 – a decline of 29.7% year-over-year. Recent sentiment in the stock has been bearish, with the average analyst earnings target moving down $0.09 over the last quarter. If Intel does miss earnings targets after they have already been substantially reduced, the stock could sell off quite a bit, which might be why this trader wants to own a long-term hedge such as this.