It’s been a comedy of errors for Intel Corporation (NASDAQ: INTC) as the company has had a hard time keeping up with production deadlines and developing small chips that can be used in ever-smaller devices in the Internet of things (IoT) age. The loss of Apple Inc (NASDAQ: AAPL) and the price surge in Advanced Micro Devices, Inc (NASDAQ: AMD) is only a reminder of management’s failure, but the current price is beginning to attract bullish option interest that is pointing to higher prices.
In the company’s most recent earnings release they discussed the progress of the company’s 7nm CPU:
“The company’s 7nm-based CPU product timing is shifting approximately six months relative to prior expectations. The primary driver is the yield of Intel’s 7nm process, which based on recent data, is now trending approximately twelve months behind the company’s internal target.”
With AMD already having developed a 7nm chip and International Business Machines Corporation (NYSE: IBM) announcing their Power 10 chip for data centers that is being manufactured by Samsung’s 7nm chip manufacturing process, it puts into perspective how behind the game Intel is. However, the question at this point is whether this information is priced into the share price already.
On Monday, there was over 44,000 contracts traded on the 21 AUG 20 $50.50 call option. This unusual volume follows unusual option activity on August 14 and August 13 on the same strike price.
Action to Take: The building inventory of long options on the $50.50 strike is an indication of a short-term move higher from the $48 support level. The near-term expectation is a retest of the high of the gap day on July 24 near $52.
Option traders may want to consider buying an 18 SEP 20 47.50/50 long call vertical for $1.30 or less.