Trade Alert – Intel Stock Still Under Pressure – In The Money Put Options Rolled

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The news for Intel Corp was poor yesterday with the release that McAfee is planning to lay off about 7,100 employees. Hours earlier some analysts had cut their earnings outlook for Intel Stock and continue to point to the narrowing of pricing on some of the chips that Intel makes as they feel that the buyers for these products will demand lower prices which means margins for Intel Products squeezing earnings. They could be right but I like Intel Stock so with the decline today I rolled some puts.

Intel Stock 5 Year Chart

With the downgrades by so many analysts and with the pressure on Intel stock I rolled my in the money options for Oct today. This was done to reduce the number of put contracts I am exposed to and at the same time to capture some of the higher premiums for the farther out put options. I believe at $21.90 where I rolled my puts, Intel sits in long-term support. The Intel Stock chart below is for the last 5 years. $21.90 sits among good support even before the market collapse in the fall of 2008. Once the panic ended, Intel Stock had pushed back to $21.00 by the fall of 2009.

Intel Stock - 5 Year Chart

The 5 year chart on Intel Stock from Oct 2007 to Oct 2012

Intel Stock and Rolling In The Money Put Options

Here are the Intel Stock puts I rolled this morning with Intel Stock at around $21.90.

10 Oct $25 bought $3.05 rolled to 9 Jan $25 $3.50 – reduced 1 put contract – freed $2500.00

10 Oct $24 bought $2.10 rolled to 8 April $24 $3.10 – reduced 2 puts contracts – freed $4800.00

10 Oct $23 bought $1.20 rolled to 8 Dec $23 $1.70 – reduced 2 put contracts – freed $4600.00

Retained 5 Oct 22 put contracts. I may accept assignment of these if the stock stays below $22.00 and then pick up the November dividend and sell in the money covered calls.

Available capital freed = $11,900.00

Intel Stock Rolling In The Money Put Options Summary of Today’s Trade

I will use this to sell puts at lower strikes should Intel Stock continue to decline.

Intel Stock Goals and Objectives Of The Continuing Trade

The overall objective remains the same. Roll puts and reduce the number of contracts. Always roll for a credit when possible. Use the freed up capital to sell further out of the money naked puts to slowly work the positions lower in Intel Stock over time. Continue to add to the profits of the trades going forward. Eventually accept shares and sell covered calls to be exercised out of the shares. When selling covered calls, make sure I am selling beyond dividend dates to try to capture the dividend.

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  • Mule

    Turning into an expensive long-term low-return project. I rolled and reduced contracts but won’t average down until RSI > 40. Good luck.

  • Mike Pharo

    Teddi,
    I was assigned last night on 10 of my 10/20/2012 25 Intel put contracts. I was going to roll next week but got assigned early. Call option premiums look pretty thin right now — any suggestions to work my way out of these shares?
    Thanks

  • It comes down to your goal. My goal is to continue to roll out, reduce and sell more puts at lower strikes. I continue to add to my position, in Intel Stock and all the while I am lowering myself into the stock. Eventually I will have shares. Any investor who does not want shares would never do this strategy. This is only for those who eventually want to own shares but want a lot of the cost of the shares paid for through other people’s capital. I like Intel Stock but I want premium first. If you do not want stock never sell puts as the stock pushes down. Wait for the uptrend to sell puts.

  • Remember to watch the premium. I rolled mine on Tuesday because the big drop dried up the premiums. When you are in the money with puts the game changes. Forget delta, RSI and everything else. Concentrate on two key areas – dividend being paid and your put option premium. These alone govern when to roll deep in the money puts.
    I have a question or two on the shares themselves. 1) Are you building a position in Intel Stock?
    2) How much have you earned so far.
    3) What is your time horizon for holding the shares.
    4) Would you consider splitting them up into groups as this means more commission costs?
    5) Would you apply more capital to this trade once Intel Stock turns back up to average down?
    6) Have you checked out the cry baby strategy for this recovery? http://www.fullyinformed.com/shop/investment-strategies-ultra-etf
    It is perfect for this recovery without adding more new capital but it won’t work overnight. It is for those who are longer term but want to keep trading for more income but not use new capital.
    Once you reply I can work out some ideas.

  • Paul

    Hi Teddi
    I am short 5 of the 23 strike puts on INTC and I am not worried about being assigned although I would prefer not to be. I have rolled them out weekly for a couple of weeks. Their is an earnings announcement on the 16th of October and that does concern me a bit. I don’t recall you mentioning anything special about earnings. Do you just sit with your puts and let the chips fall where they may or is their something that you would consider in the event that the announcement is worse than expected and the stock craters. Ditto for MSFT that announces earnings 2 days later.
    Thanks