Short-term call buying hits Intel (INTC)

“Calls up, stock down? That’s a buyer, folks!” One of Jud Pyle’s trademark phrases was true yesterday in the case of Intel (NASDAQ: INTC).

With earnings out of the way (Intel issued a modest positive earnings surprise last Thursday after the close), some investors may be looking for additional upside in the semiconductor giant. In Wednesday’s trading, more than 25,000 contracts traded on the March 22 call, which headed into yesterday’s session with open interest of only 1,064. It is therefore safe to assume that these call options traded to open.

It does not seem to be a professional or institutional trader behind these calls, as there was a notable lack of large block trades during the session. Rather, small and mid-sized blocks were crossing the tape throughout the trading day, going off anywhere from 29 cents (in the early a.m.) to 41 cents (around 2:00 PM Eastern Time). Even though Intel itself was dragged lower along with the broad market, these calls gained ground on the day. Buying activity translated into increased implied volatility, raising the value of these call options despite a pullback in the underlying.

The long call buyers who scooped up these options at 41 cents apiece are looking for Intel to rally to $22.41 (the strike price plus the premium paid) by March expiration in about 50 days. That’s a move of almost 7%, and the March at-the-money (21-strike) straddle is currently projecting a move of $1.64, or close to 8%, between now and March expiration. Above the $22.41 mark, gains in this long call are theoretically unlimited. The maximum loss, however, is limited to the premium paid (plus any commissions or fees).

More on INTC:

Front-month options action in Intel (NASDAQ: INTC)

Bullish Buyers in Intel (NASDAQ: INTC)

Call Buying in Intel (NASDAQ: INTC) Ahead of Earnings