Buying A Call Option On Intel $INTC
Buying A Call Option On Intel $INTC
The semiconductor industry has been on an interesting path so far this year. Overall, chipmakers are underperforming the market as a whole. However, certain individual companies are doing quite well.
The biggest news from the industry has been the amount of huge mergers over the last year. Three major mergers have already been announced, and a fourth is possibly in the works.
Typically, heavy acquisition and merger activity is a bullish sign for an industry. The post M&A companies are often stronger and better positioned than before.
The top dog in semiconductors is of course Intel $INTC. And, the company just released earnings.
In summary, $INTC is a $140 billion semiconductor company focusing primarily on the PC market, but is also involved in data centers, mobile devices, and others. Intel does over $55 billion a year in sales.
As of this writing, $INTC is trading at $29.87. That’s 20% from the 52-week high and just 3% from the 52-week low. The stock is down 17% on the year so far.
So is now the time to buy a call option on $INTC?
As a reminder, a call option makes money when the underlying stock goes up. Is $INTC on the verge of a rebound?
For a more in-depth look at the biggest chipmaker in the US, you can click the link.
Here’s the deal…
$INTC surprised a lot of analysts by posting better than expected second quarter results. The company reported profits of $0.55 per share on $13.2 billion in revenues. That beat the $0.50 per share on $13 billion estimated by analysts.
The PC market has definitely bottomed out, at least in terms of expectations. Intel is having to reinvent itself since PC chips are at the core of its business. This transitory period for the company is one of the reasons why investors haven’t had high hopes for the company’s recent earnings.
Here’s the chart of $INTC:
As you can see above, the stock has not had a good year, and recently reached new lows. The share price is well under the 50-day moving average as well. However, it looks like INTC may be in a position to rebound, especially after strong earnings.
Now could be a great time to buy an $INTC call option
The big news from the earnings calls was Intel’s growth in chips for data centers. As data centers grow and become more important, there is solid opportunity for growth. While the segment remains well below the PC market in terms of percentage of revenues, it’s made big leaps in recent quarters.
What’s more, INTC still has plenty of room for growth in mobile chips and embedded chips. New technology the company is working on gives some reason for optimism moving forward.
Given the fundamentals of the company and its long-term outlook, I recommend buying a medium-term $INTC call in this situation. The January 2016 30 calls are trading around $1.70. That looks plenty reasonable to me, especially for a call with over 5 months of time value and is already essentially at-the-money.
Yours in Profit,
Gordon Lewis
Options Trading Research
Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com. You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.
Category: Options Trading
