Investors have maintained Intel Corporation (INTC) share prices range bound ahead of the release of its second quarter earnings report. With an increasing amount of out-of-the-money call options in open interest, it looks that options traders are well-positioned to profit from a bullish move. If INTC reports a favorable earnings surprise, the extraordinary option activity might lead to a big upward trend in the price movement.
In the open interest for INTC, a big collection of call options seems to be building, and option premiums are exceptionally high right now. Traders have been buying calls and selling puts in expectation of a favorable earnings report, according to option trading volumes. Unwinding their bets might put negative pressure on INTC’s pricing.
It is difficult to anticipate the path of a stock following results. A comparison of the price movement of option trading activity and stock prices, on the other hand, reveals that if the firm presents a poor report, INTC shares might fall dramatically, falling below their 20-day moving average in the first few days following the release. This is possible because options are priced for a tiny shift, but unexpected bad news might take traders off guard and cause a large drop in price.
- Traders and investors have maintained the price of Intel stock reasonably stable ahead of the announcement.
- Recently, the price has been closing close below its 20-day moving average.
- Put and call prices indicate a greater upward movement.
- Support and resistance levels depending on volatility allow for a move in either direction.
- This setup provides traders with the possibility to benefit from an unexpected outcome.
Investors who wish to safeguard their holdings or speculators who seek to benefit from accurately projecting unexpected swings in an underlying stock or index engage in option trading. That is, option trading is a wager on market probabilities. Chart watchers may acquire important information by examining the specifics of both stock and option price activity, albeit this price behavior is best appreciated with context. The chart below depicts the price movement of INTC shares on Wednesday morning. This depicts the setting before the earnings release.
The stock’s one-month trend shows that the shares are still trading in a pretty narrow range. Notably, the greatest INTC share price in the last month was approximately $56 in late June, and the lowest share price was about $54 a few days before the announcement. The price settled in the center of the range shown by the technical studies on this chart.
The indicators used in the research are 20-day Keltner Channel indicators. These are price levels that are multiples of the stock’s Average True Range (ATR). This array serves to emphasize how the price has fluctuated but largely stayed in an average range during the month. This price movement in INTC shares suggests that investors do not anticipate a significant change from the next report.
The Average True Range (ATR) has become a widely used technique for illustrating historical volatility over time. The average amount of time employed in its computation is 10 to 20 time periods, which comprises two to four weeks of everyday trading.
In the backdrop of INTC’s price trend being in a medium range, chart watchers may see that traders and investors are expressing apprehension over results. The share price progressively fell in the week before results, eventually ending below the 20-day moving average the following week. As a result, chartists must decide if the change reflects investors’ expectations for a positive earnings release or not.
Option trading data may assist chart watchers build an impression about investor expectations by providing extra information. Recently, option traders have favored calls over puts by a narrow margin, since there are more calls than puts in open interest. This often indicates that investors anticipate favorable news from the corporate report. However, traders anticipate that INTC will not move much, either up or down, after results.
The Keltner Channel indicator shows a series of semi-parallel lines based on a 20-day simple moving average, as well as an upper and lower line. Because the higher lines are produced by adding a multiple of ATR to the average price and the lower lines are drawn by subtracting a multiple of ATR from the average price, this channel indicator is an ideal visualization tool for displaying historical volatility.
Option traders have priced their options as a wager that the stock would close inside one of the two boxes illustrated in the chart between now and July 23, the Friday after the earnings report is revealed. The price offered by call option sellers is shown by the green-framed box. If prices rise, there is a 38% probability that Intel shares will settle inside this range at the end of the week. The red box reflects the pricing for put options with a 33% chance of being exercised if prices fall after the announcement.
It is worth noting that the open interest contained about 1,100,000 active call options vs around 1,000,000 put options, illustrating the bias that option purchasers had, as calls dominated puts. This abnormally equal number of calls and puts generally indicates that option traders are dubious about a price increase. However, the approximately similar size of the call and put boxes indicates that the nearly equal amount of call and put options traded has not pushed expectations higher or lower. This situation suggests a significantly more relaxed attitude.
A 10-day Keltner Channel analysis set at four times the ATR yielded the purple lines on the chart. This metric creates closely connected price action zones of strong support and resistance. These areas appear when the channel lines have made a noteworthy turn during the last three months.
The levels marked by the turns are noted in the chart below. What stands out in this chart is how close the call and put prices are, with lots of room to run on either side. Even if calls are being bought over puts, this shows that option purchasers do not have a strong confidence about how the firm will report. Despite the fact that investors and option traders do not anticipate it, a surprise announcement would cause prices to move considerably in either way.
These support and resistance levels demonstrate a wide variety of price support and resistance. As a consequence, any unexpectedly positive or unfavorable news might take investors off guard and result in an abnormally significant shift. INTC shares declined 5.3% the day after the last results report and continued to fall the following week. Following this news, investors may anticipate a different kind of price movement. With so much space in the volatility range, share prices might increase or fall more than anticipated, but there is also greater possibility for prices to climb.
INTC shares generally make substantial changes following results, which might cause index prices to move immediately. Regardless of what the study says, it will almost certainly have a substantial influence on equities in the Technology sector.
It will be fascinating to see how the semiconductor shortfall develops and if Advanced Micro Devices, Inc. (AMD) continues to eat into Intel’s market share. A strong report might boost the stock prices of other semiconductor companies such as AMD, Apple Inc. (AAPL), or Taiwan Semiconductor Manufacturing Company Limited (TSM).It would also have an impact on exchange-traded funds (ETFs) like State Street’s Technology Sector Index ETF (XLK) and perhaps Invesco’s QQQ Trust ETF (QQQ).
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