Quarterly Outlook
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Peter Garnry
Chief Investment Strategist
Investment and Options Strategist
Summary: Intel’s recent news has created a volatile environment, presenting both opportunities and risks for options traders. This article explores strategies to navigate high implied volatility and speculative scenarios, including how to spot put/call skew and what it reveals about market sentiment - insights that apply to Intel and beyond.
Intel (NASDAQ: INTC) has been making headlines lately, with reports suggesting a potential $5 billion investment from Apollo Global Management. This news follows previous speculation that Qualcomm might be interested in acquiring the semiconductor giant. While a full acquisition seems unlikely at the moment, such news can cause significant market movements and volatility. For options traders, these conditions present both opportunities and risks.
Even if you decide not to trade Intel at this time, the insights from this article can be applied to other stocks or situations where similar conditions exist, such as high volatility, potential takeover news, or low nominal stock prices. We’ll explore what the options chain indicates and how to approach different trading strategies in various scenarios.When a company like Intel is involved in takeover speculation, its stock price can become highly volatile. This uncertainty can lead to rapid price movements, often in both directions, as investors react to news and rumors. For options traders, this environment offers opportunities but also requires caution. Here’s what to consider:
Here’s what to consider:
The option chain data for INTC, focusing on the November 15th expiry (51 days out), reveals contrasting signals between implied volatility (IV) skew and price skew. This expiry was chosen because it is far enough to capture market expectations beyond immediate noise yet close enough to reflect the impact of upcoming events like earnings or corporate announcements. The $16 put and $30 call were selected as they are equidistant from the current stock price of $22.81, providing a balanced perspective on how the market is pricing potential movements in both directions.
The $16 put has a higher implied volatility (65.04%) compared to the $30 call (61.93%), indicating a put skew. This suggests that downside protection is relatively more expensive, reflecting market concerns over potential negative developments or a broader risk-off sentiment. However, when looking at the actual option prices, the $30 call ($0.37) is trading significantly higher than the $16 put ($0.15). This price skew implies that traders are placing a premium on upside potential, likely driven by recent speculation around a Qualcomm takeover or a $5 billion investment from Apollo Global Management.
These contrasting signals between IV and price skews highlight a market that is hedging against downside risk while simultaneously speculating on a significant upward move. This dual sentiment reflects a complex market environment where participants are balancing caution with optimism, positioning themselves for potential volatility amidst a backdrop of strategic developments and market speculation.
Based on your outlook for Intel, various options strategies can be considered. Whether you’re expecting a big move, a moderate change, or stability, there are tailored approaches for each scenario. Before executing any of these strategies, it’s essential to enter them into a strategy builder or trading window, such as those available in the SaxoInvestor, SaxoTrader, or SaxoTrader Pro platforms. This allows you to evaluate the potential risk, reward, and profit/loss scenarios, ensuring the trade aligns with your expectations and risk profile. Here are a few strategy ideas to match different market expectations:
Intel’s current situation presents both opportunities and challenges for options traders. The elevated implied volatility and takeover speculation create a unique environment, but also come with substantial risks. Whether you decide to trade Intel right now or not depends on your risk tolerance, market outlook, and trading strategy.
Use the information provided here to guide your decision-making, but remember to conduct your own due diligence before entering any position. No single strategy fits all traders, and the right choice will vary based on individual objectives and market conditions. So, to trade or not to trade? That’s a question only you can answer.
As always, stay vigilant and adjust positions as new information emerges. Happy trading!