Can China's Ban on Intel Chips Keep the Stock Down?
By:Tom Preston
When it comes to finding news I can rely on, I go to the one source I trust—our own Vonetta Logan. And when she let us know on yesterday morning’s show that China’s government would be banning several U.S. manufacturers’ chips from its computers, I checked the price of Intel (INTC).
Sure enough, it was down over 4.5% on the open and hit its lowest price in over four months. But over the course of the day, INTC crept back up and closed down a more modest 1.7%.
INTC will still make money, and if that’s the worst news to come out for the stock, it might manage to rally. INTC’s out-of-the-money (OTM) calls are trading over equidistant OTM puts, indicating the market sees risk to the upside.
That might be enough for a trader to consider a bullish strategy. INTC’s IV (implied volatility) has been moving higher with the approach of earnings in late April, and with a 37% overall IV and a 57% IV rank, its options make good candidates for short premium strategies.
If you think INTC might bounce back in the next few of weeks and are willing to take risk through earnings, the short 40 put in the May weekly expiration with 38 DTE (days to expiration) is a bullish strategy that has an 87% probability of making 50% of its max potential profit before expiry and generates $2.34 of positive daily theta.
Tom Preston, tastylive chief market strategist, is responsible for the brokerage’s trading strategy, client-facing trading software and futures trading products. He contributes to Luckbox magazine and writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.
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