SAN FRANCISCO/CHICAGO, Jan 14 (Reuters) - Options investors appear to taking a cautious stance ahead of Intel Corp’s quarterly results on Thursday, with some hedging their bets on fears that expectations had risen too far too fast.
With half an hour of trade left, Intel option volume was seven times greater than its recent average daily turnover with 419,000 calls and 221,000 puts traded, according to option analytics firm Trade Alert.
Shares of Intel have gained 7 percent in the past two weeks, and on Thursday jumped more than 2 percent to a 52-week peak, as investors bet on a strong set of numbers.
“I would say the option activity suggests a bearish reaction after Intel’s earnings tonight,” said optionMonster co-founder Jon Najarian. “There were an awful lot of put options being purchased during the first hours of trade” early on Thursday.
“Although there is some time to go, there could be a different bias in the final hour of trade.”
Chipmakers, whose products are found in everything from computers to smartphones, are emerging from the industry’s worst downturn in decades and are expected to benefit from renewed spending on technology by corporations in 2010.
But given Intel’s strong stock run-up in 2009 and the first two weeks of 2010, options traders preached caution.
“It could be disappointing guidance. It could be that the whisper numbers are too high. It appears that investors want protection or are taking downside bets with put options,” Najarian said.
According to optionMonster’s tracking systems, investors are buying the January $21 put strikes as well as the February and April $20 put strikes. January options expire on Friday after the close. The calls are trading at a slightly bullish bias with just over 51 percent that have been bought on the offer, Najarian said.
“There are definitely a lot of cautious bets being made in the options pits ahead of Intel earnings, potentially less speculative in nature and more of a profit-taking strategy due to the recent run-up in the stock,” said Joe Kunkle, a founder of OptionsHawk.com.
Investors often turn to equity put options, allowing them to sell a stock at a fixed price within a specified time period, to speculate on potential stock weakness or to protect an existing stock position. A call conveys the right to buy a company’s shares at a given price and time.
Wedbush Morgan analyst Patrick Wang said the unofficial “whisper” numbers, or current expectations of investors and analysts, slightly outpace the average expectations on Thomson Reuters I/B/E/S. According to that data, Wall Street expects Intel to report fourth-quarter revenue of roughly $10.2 billion, with a gross margin of 62.19 percent, and earnings of 30 cents per share, excluding items.
Wedbush Morgan analyst Patrick Wang said the whisper numbers show analysts expecting revenue of $10.3 billion to $10.4 billion, a 63 percent gross margin, and earnings of 35 cents per share.
Analysts will also be watching for the world’s largest chipmaker’s forecasts for the first quarter. “Whisper” numbers point to a 5 percent to 7 percent decline in revenue from the previous quarter and a 59 percent gross margin, Wang said.
(Published Jan 14, 2009, exclusively on the wire at Reuters News.)