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I glanced at my portfolio looking for stocks that I love but are unpopular with others right now. I found Intel (NASDAQ:INTC) and decided to add to my position with an options strategy (cocktail involving four ingredients) that pays me even if the current price war in which Intel is engaged turns the shares into dead money the rest of the year.

This strategy also forces me to buy more Intel if the stock drops, but I'm happy to do that. In most scenarios, a drop in Intel would be the result of cyclical factors. Also, any significant drop in Intel from here ($19.00) would bring out the value players who right now are buying banks, oil producers and mortgage lenders. After all, according to First Call, Intel is trading at a p/e of just over 14 against 2008 earnings, and has a dividend yield of almost 2.5%. Intel is a tech stock that looks like value.

Here's the trade I did Wednesday [Warning: It gets a bit complicated, please don't try this at home] (think TV stunt people jumping over an empty crevasse in a car that has been partially lit on fire - fun if you know what your are doing but . . .): I used shorting of options which can be dangerous for the uninitiated (and even the initiated).

I bought INTC for $18.99.

I sold an equivalent amount of $22.50 strike calls (Jan 2008 expiration) at $0.80.

I sold an equivalent amount of $17.50 strike puts (Jan 208 expiration) at $0.95.

Bought 2 times the amount of $12.50 strike puts (Jan 2008 expiration) for $0.13.

The result:

I own Intel at a net cost of $17.41 (18.99 (stock) - $0.95 (put sold) - $0.80 (call sold) + $0.13 x 2 (puts bought).

My maximum upside is $5.42/share (22.50 strike price - $17.41 cost + $0.33 dividends) or 31%.

My maximum downside is a total of $9.58 (55%).

The calculation goes like this:

$17.41 (cocktail cost) - $12.50 (put strike) = 4.91 and

$17.50 (strike of puts sold)- 12.50 (protection puts) = 5.00 [remember those extra puts]

I still get to add back dividends of $0.33 to negate part of the loss.

I suffer double losses as falls below $17.50. I have set aside some cash for the eventuality that I buy INTC and, unless something has changed (either in my portfolio, the market or the prospects of INTC), I would be happy to buy more INTC at $17.50. Buying the $12.50 puts increases my options should stock really fall due to some event that changes the company. It also means I don't have to set aside as much cash in case my $17.50 puts are assigned (I am forced to buy INTC at $17.50).

Disclosures and Confessions: I own and have been accumulating INTC. I currently hold the position described above. I do not expect to purchase more INTC at current market conditions. I also own a small (losing) position in AMD. I still don't see AMD at value because their future seems less certain than Intel.

INTC 1-yr chart:

INTC 1-yr chart

Source: Trading Idea: My Four-Way Intel Play