Play A Bounce In Intel With Options

| About: Intel Corporation (INTC)

Intel (NASDAQ:INTC) is the largest semiconductor company in the world. With its "Intel Inside" sticker on nearly every PC, the company has made itself a household name. Its products also include flash memory, motherboards, connectivity products, and network storage products. So far, the stock has gone from a high of $28 to a low of $20. This is a decline of 28.6% in less than a year. At $20, I believe downside is limited and the stock is ready to bounce.

There are many reasons to own Intel, but here are some of the most important:

  • The company owns over 1400 patents within its portfolio
  • At 95% market share the company is clearly the leader within its industry
  • The balance sheet looks great with 3 billion in net cash (3%)
  • The stock trades cheap at a price to earnings ratio of 9
  • At 4.5% its dividend is larger than most utility companies
  • Its payout ratio is only 37% for a dividend so large
  • Not many companies have the capital to compete its product portfolio
  • Its shares outstanding has been decreasing every year for the past 5 years


My options play is to buy 1 March $20 call for .96 and sell 2 March 2013 18 puts for .47 each. The total net is .03. By making this spread you will receive immediate upside on the stock which is currently trading at $19.89 while only getting long at 18.

Disclosure: I am long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.