Chipmaker Intel (INTC) is down 14% over the past year, underperforming the chip space as a whole. One trader sees a further decline in the weeks ahead.
That’s based on the August 23 $26 puts. With 22 days until expiration, 18,424 contracts traded compared to a prior open interest of 109, for a massive 169-fold rise in volume on the trade. The buyer of the puts paid $0.28 to make the bearish bet.
Intel shares recently traded for just over $30. Shares would need to drop by at least $4, or nearly 15% in under a month, for the option to move in-the-money. With Intel shares now hitting new 52-week lows near $30, such a move could happen.
The chipmaker has had a quiet year. Revenues rose by 9%, but earnings were flat. And shares trade at about 30 times earnings, a premium to the current stock market.
Action to take: With shares in a downtrend, investors may want to wait for shares to show signs of a bottom and rebound before buying. Intel currently pays a 1.6% dividend, but will have a slightly higher yield when shares bottom.
For traders, the August $26 puts are aggressive, but could see high double-digit returns, or even better, depend on how chip stocks perform in August.
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 company mentioned in this article.