Shares of chipmaker
Intel (INTC) have struggled in the past year, with shares down nearly 47 percent. One trader sees the possibility for a further drop in shares in the coming months.
That’s based on the March 2023 $20 puts. With 182 days until expiration, 4,227 contracts traded compared to a prior open interest of 217, for a 19-fold rise in volume on the trade. The buyer of the puts paid $0.60 to get in.
The stock recently traded close to $29, so it would need to shed nearly one-third of its value in the next six months for the option to move in-the-money. Shares are also at a 52-week low.
Given the company’s recent operational performance, that could happen. Revenue is now down 22 percent over the past year, and the company has reported a loss in its most recent quarter.
Action to take: Shares are getting inexpensive at 10 times forward earnings, but the market isn’t sure how the company can grow from here. That may lead to low share prices for some time. The stock yields 4.6 percent, so patient investors may want to consider adding to shares here near their 52-week lows.
For traders, the short-term trend remains down, and shares could further drop on any market weakness. That makes the March puts attractive for any short-term move lower. Traders should consider taking quick profits on this trade, given current market volatility.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.