Intel (INTC) got some rare positive comments from an analyst today. Wells Fargo up its earnings estimates by 4% today stating revenue from cloud computing bode well for earnings. It is one of several positives on the stock that I think deserves an option play that could be very lucrative if the shares bounce back in the first quarter of 2013.
Some other positives for Intel:
- Intel has underperformed the market by some 30% in 2012, with most of that underperformance coming in the fourth quarter (See chart). Now that we are at end of quarter and year end window dressing, a headwind to the shares will end today.
- In addition, the stock looks like it bouncing again off long term technical support (See Second Chart).
- The stock will also be included in the "Dogs of the Dow" index for 2013 and its 4.4% dividend yield should also put a floor at around its technical support as well.
Since the stock appears to have little downside but some recent catalysts, I want to design a lucrative option strategy that could provide a generous return if the stock recovers 50% to 60% between its current technical support level and its recent highs of around $27 a share in the first couple months of the year.
Option Strategy: I am going to initiate a bull call spread on INTC. I am going to target the April 21/24 call pair for a net 65 cents. If INTC can get to $24 by April 20th, I will make $2.35 on my $.65 investment and it is a very cheap way to play a plausible modest rise in Intel stock.
Disclosure: I am long INTC.