My only disappointment from the Q1 results : they are not ready with a smartphone chip for US. I was expecting one in Feb MWC Barcelona. your thoughts?
Over reaction here - stock might fall to $20 but with a buy back and divy around the corner - I doubt it will fall below that. I want to buy Jan 2015 $22 strike calls - not sure when to enter. Any thoughts on this?
Q1: MWC is the new big show for Intel. It will have an NFC flavor. Intel has acquired a lot of IP in the last two years and it should begin to come together on silicon. I have too much to learn in this area to be much help.
The VIX has dropped to 12.46 which is very, very low. When the SEC made naked shorting illegal, even for market makers, I expected that the VIX would stay high since the market makers would have extra borrowing costs to hedge their positions. VIX is closely related to the premium on SPY options. When option premiums are low, you are better to be a buyer than a seller.
If you are long options and the VIX goes up, the option premium goes up.
Jan2015 $22 are out of the money and the price drop off will be non-linear with Intel share price drop. They are priced at $2.04/$2.08. The non-nickel pricing indicates that there is some activity pressing on both the buy and sell side. I would expec the pricing to be $2.05/$2.10.
I don't know what happened to Romit Shah, Covello and all the other Intel negative analysts and their traditional downgrades. They will probably start their echos next week to maximize the damage.
With the big drop and low VIX, I would probably take a partial position here (1/4 or 1/3 of your final goal) and another part if it breaches $20 and a final part when it gets to the $19.xx low area. If you have a concern about the analysts piling on, go a little lighter on the buy.
The Jan $25 calls give you an idea of what would happen to the Jan$22 pricing if Intel dropped $3 to $19 tomorrow. The Jan 2015 $22 would probably priced like the Jan2015 $25 or $1.14/$1.18 area. This gives you an idea about your downside risk in a given share price range.
You have to match the trade with your comfort level, risk tolerance, investment goals. The most important thing is to be able to sleep at night. Last week, I booked some Intel profits so it made Thursday AH and Friday much, much less painful.
You might already know but I like to nag.
Dividend impact on option pricing.
The 2015 series is a place where you can see the pricing impact of the Intel dividend on puts and calls. Your Jan $22 is $2.04 bid and is 80 cents out of the money. The $20 put option is $1.20 out of the money (farther than the call) and is priced at $310. Notice the assymetric pricing. The extra $1 premium on the put option is long term pricing anomoly caused by the option market maker having to price the put higher for dividend arbitraging.
Buying calls ties up the amount of cash for the calls. Selling puts ties up the amount of cash to cover the actual shares if they were "put" to you.
"Notice the assymetric pricing. The extra $1 premium on the put option is long term pricing anomoly caused by the option market maker having to price the put higher for dividend arbitraging. "
I realize that I don't fully understand the dividend arbitrage thing as my wrong thinking says the calls should have the higher premium since the calls-buyer can exercise them just before the ex-dividend day and profit from getting the divvy etc.
But that aside it seems that buying puts have inherent disadvantage since the premium will always be higher due to this asymmetric pricing build into it. (that is regardless or what one thinks of the stock future direction)... am I missing something here?