Intel Corporation INTC shares traded higher by 1.6% on Monday despite management confirming last week the company is still dealing with supply problems.
Following the frustrating supply news, at least one large option trader seemed to reconsider his or her bullish positions in Intel on Monday. Here’s a look at the trading action in Intel.
The Trades
On Monday morning, Benzinga Pro subscribers received 12 option alerts related to unusually large trades of Intel options. Here are the most noteworthy trades:
- From 9:53 a.m. to 9:58 a.m., likely one trader sold a total of 3,543 Intel call options with a $65 strike price expiring in January 2021. The series of nine trades were executed at or near bid prices ranging from $3.75 to $3.801. All together, the trades represented a bearish bet worth more than $1.32 million.
- At 9:56 a.m. in the middle of all the other bearish action, likely the same trader bought 500 of the same $65 January 2021 call options at the ask price at $3.75. The trade represented a $187,500 bullish bet.
- At 10:11 a.m., potentially the same trader sold 500 January 2021 call options with a $70 strike price at the bid price at $3.363. The trade represented a $118,150 bearish bet.
Of the 12 total large Intel option trades Wednesday morning, just three involved calls purchased at or near the ask — trades typically seen as bullish.
The remaining nine trades were calls sold at or near the bid or puts purchases at or near the ask — trades typically seen as bearish.
Why It's Important
Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.
Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.
Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge.
In this case, given the timing and the sizes of some of the January 2021 Intel option trades on Monday, traders should understand there’s a strong possibility that at least some of them could have represented institutional hedging.
More Supply Issues In 2020?
The majority of the large option trades in Intel on Monday are bearish in nature, suggesting the large Intel trader may have thrown in the towel on a 2020 bullish thesis following the recent supply issue headlines.
After a year of dealing with issues surrounding Intel’s 10nm manufacturing process, the company apologized to investors last week and said market growth has continued to outpace Intel’s production capacity as it works to ramp up its supply.
While Monday’s call sales may represent an Intel bull cashing out of a position after the stock gained 31% in the past three months, the fact that the calls sold are dated so far into the future makes it less likely they are related to any near-term momentum trade.
Benzinga’s Take
The lone January 2021 call purchase in the middle of the rest of the call sales likely also represented a sale, even though it took place at the ask price. Given the pattern of selling and the 500-share lot size (the same as many of the other call sales), the trader likely simply got one trade in at the ask price due to fluctuations in the market.
Intel's stock traded around 458.44 per share at time of publication.
Do you agree with this take? Email feedback@benzinga.com with your thoughts.
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