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Intel Corporation  
About The Company
Market Cap 109.4B
Revenue (FYR) $43.6B
EPS (TTM) $2.01
Shares Out. 5.5B
Book Value $8.97
Div/Share $.72
Payout Ratio 30.5x
P/E 9.9x
Price/Sales (FYR) 2.5
P/Cash Flow (TTM) 6.8x
Operating Margin 35.45%
Debt To Capital 4.1%
Gross Profit Margin 26.28%

Intel Corporation is a semiconductor chip maker, developing advanced integrated digital technology products, primarily integrated circuits, for industries, such as computing and communications. This is probably the number 1 chip maker to own. It is the largest chip maker in the world and although driven by consumer demand, Intel has a very strong balance sheet. The Company designs and manufactures computing and communications components, such as microprocessors, chipsets, motherboards, and wireless and wired connectivity products, as well as platforms that incorporate these components. It operates in nine operating segments: PC Client Group, Data Center Group, Embedded and Communications Group, Digital Home Group, Ultra-Mobility Group, NAND Solutions Group, Wind River Software Group, Software and Services Group and Digital Health Group.

 

 

 
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  INTEL STOCK - 2010
INTEL STOCK SYMBOL - INTC
ONGOING EVALUATION & TRADE - Year 1

This will remain an ongoing trade. Intel is the largest semiconductor chip maker in the world. With a market cap of over 109 billion and a great board of directors, Intel is positioning itself to continue to dominate the semiconductor industry. Last year it purchased McAfee Security. With a payout ratio of just 30.5x and earnings of more than 43.6 billion, Intel has a gross profit margin of 26.28%. I believe this will make a long term naked put and covered call strategy possible. The plan is to eventually own shares in INTEL but through the use of other people's capital. To to this I will start with selling ATM or ITM Naked Puts and Naked Puts OTM to eventually pick up the stock. The objective therefore is to make enough through naked put selling to help pay for a substantial amount of the capital required to own the stock. I plan to set a realistic annual goal of 12% while limiting my volatility through the selling of puts, calls and collecting the dividend if assigned shares.
INTEL TRADES BY YEARS
VIEW INTEL-2011 TRADES
VIEW INTEL-2010 TRADES
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Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use

 

 

YEAR 1: - Trade Commenced March 2010
Goal for 2010: 9% (9 months)
Strategy: Sell Naked Puts Until Assigned
 
Capital In Use At End Of 2010 25,518.50
Income Earned in 2009 (9 months) 4,518.50
Return On Capital in 2009 (9 months) 17.7%
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I set up a Yahoo forum for those interested in discussing selling stock options for income including covered calls, selling naked puts, spreads and other option and stock strategies. JOIN HERE
 
TRADE COMMENCED March 10 2010
GOAL FOR 2010: 9%

STRATEGY - SELLING NAKED PUTS UNTIL ASSIGNED
Mar 10 2010 To start I looked back 3 years on Intel Stock. Up until the crash of 2008 the stock stayed stuck in a nice trading range which makes puts and call selling viable. The chart below shows the past 3 years by month. By changing the chart to monthly, I can see the range more clearly. From Nov 06 to Jul 07 naked puts would have worked out perfectly if I stayed in the median of around $20.00 to $22.00. From Aug 2007 to Jan 2008 naked puts at the $22.00 range would have still been viable. The same held true for Jan 2008 to Sep 2008.

This next chart looks at Intel during the crash of 2008 to 09. The technology stocks lost almost 50% of their value in the collapse. This is a stark reminder that these stocks are volatile in a bear market as the believe is simply that a recession means less sales for technology related items and therefore a declining valuation on Intel. Look though how even in November 2008 the stock held on at the 16.00 range before finally giving way. The more interesting aspect of the below chart is the quick recovery back to the $18.00 to $19.00 range.

 

Mar 10 2010 21.0 STO 5 NP Apr 20 @ .36     13.25   10013.25 166.75 1.66 166.75
Mar 10 2010 21.00 STO 5 NP Apr 19 @ .16     13.25   9513.25 66.75 0.70 233.50
Mar 22 2010 22.27 BTC 5 NP Apr 19 @ .05           (38.25) (0.40) 195.25
Mar 22 2010: For the past few months the stock has been stuck in the 19 to 21 trading range and now have broken out. I am closing my $19 puts early and will move to the $21 naked put as the stock climbs higher. If it keeps climbing I will sell out of the money on the stock.

Mar 22 2010 22.27 STO 5 NP May 21 @ .48     13.25   10513.25 226.75 2.15 422.00
Apr 16 10 23.92 Expiry: 5 Naked Puts Apr 20 expired                
Apr 16 10 23.92 Expiry: Bought to close 5 Naked Puts May 21 @ .07     13.25     (48.25) 0.45  
Apr 16 10 23.88 Sold (STO) 5 Naked Puts May 22 @ .17
Comments: I have sold just 5 naked puts and will wait for a pullback to sell the remaining 5 naked putsS
    13.25   11013.25 71.75 0.65 445.50
Apr 27 10 23.30 STO 5 Naked Puts Jun 23 @ .77     13.25   11513.25 371.75 3.22 817.25
May 13 10 22.55 STO 5 Naked Puts Jun 21 @ .36     13.25   10513.25 166.75 1.58 984.00

May 21 2010: This is a great company and I plan to be with it for quite a while. Remember the goals and objectives of why i am in Intel. If you forgot them, scroll up the page to read the Goals and Objectives.
On Friday I was holding 5 NP Jun 23; 5 NP Jun 21; 5 NP May 22.  I rolled the May 22 to Jun 22. The premiums are excellent and made the roll an easy decision. I also looked at my Jun 21. I had originally written it for .36 cents. To close it on Friday cost me .96 cents – so my loss was 60 cents on the buy back. I then sold the same number of contracts for July 21 at a 1.77 for a profit of 1.17 or 5.5%.

It’s a simple step to know how or when to roll the puts.

1)     I check the price of the put to buy it back to see what the loss would be. In my case .60 cents – or I am losing .60 / 21 (Strike price) = 2.8% loss.

2)      Then check the same price (or if you are a bit concerned a lower price) in my case 1.77 for Jul 21

3)      Figure out what the return is 1.77 / 21 (strike price) = 8.4%.

4)      Figure out the time period – I keep it simple – I am losing 2.8% for a one month period. I am gaining 8.4% over a 2 month period or 4.2% per month.

5)      The decision is easy – close the Jun put and sell the July put. I could wait until the Jun expiration gets closer but if volatility decreases or there is a significant change I may not make the 4.2% per month return.

The whole idea of course is to take advantage of the volatility of the market. Three weeks ago this would not have been an advantageous trade. I am holding my Jun 23  to see if we get a bounce going into memorial weekend (which historically has a bounce both into it and a few days out of it). On a bounce I then check the premiums to see if I should roll the put – if the return is advantageous.

Remember that the plan is to someday end up with the stock, but I would prefer to keep earning money from the puts until that day arrives. Who knows, perhaps I will earn enough from the income to pay for a lot of the stock when I take assignment.

 

May 21 10 20.88 BTC 5 NP May 22 @ 1.08     13.25     (553.25) (5.02) 430.75
May 21 10 20.66 STO 5 NP Jun 22 @ 1.88     13.25   11013.25 926.75 8.41 1357.50
May 21 10 20.66 STO 5 NP Jul 21 @ 1.77     13.25   10513.25 871.75 8.29 2229.25
May 21 10 20.88 BTC 5 NP Jun 21 @ .96
Comments: See my comments below for May 21 2010 to explain why I bought to close this position so early.
    13.25     (493.25) (4.69) 1736.00
May 25 10 20.20 Bought 1000 shares @ 20.20     7.00 (20207.00)        
May 25 10 20.20 STO 10 NP JUL 17.00 @ 31     19.50   17019.50 290.50 1.70 2026.50
May 27 10 21.50 Sold 1000 shares @ 21.50     7.00 21493.00   1286.00   3312.50
Jun 2 10 21.20 STO 10 NP JUN 19 @ .16     19.50   19019.50 140.50 0.73 3453.00

June 7 2010:

Today the stock again fell below the 200 day moving average for the third time in less than a month, a sure sign that the selling will probably intensify. With the sharp May selloff, June does not look much better. In May 2009 the stock climbed to 16 and was stuck there for some time. In this pullback I will not be surprised to see the stock fall to $16 as well. That will be a good place to be in the stock. Could it fall lower? It hit $12.00 in Feb-Mar of 2009, so $16 should afford me some room to sell covered calls if I was assigned. Meanwhile I will continue to roll my naked puts at this stage and then put more in place as the stock declines and volatility increases put premiums.
 

 

Jun 7 10 21.00 BTC 5 NP JUL 21 @ 1.05
Comments: I closed this put as it is in a large profit position having sold it for 1.77 and buying it back for 1.05. This also releases $10500 in capital for naked puts.
    13.25     (511.75) (4.86) 2941.25
Jun 7 10 20.98 BTC 5 NP JUN 22 @ 1.23
COMMENTS: I bought to close this put as I sold it at 1.88 and I wanted to lock in this 34% profit in the event that i believe Intel will fall below 20 before Jun option expiry. This releases 11000.00 for more naked puts
    13.25     (628.25) (5.7) 2313.00
Jun 7 10 20.98 BTC 5 NP JUN 23 @ 2.07     13.25     (1048.25) (9.10) 1264.75
Jun 7 10 20.30 STO 4 NP OCT 22 @ 2.81
Comments: I rolled the JUN 23 to the OCT 22 and sold 2 less puts for a net credit of $216.00. This frees up $4600 in capital, plus by moving the 3 to the $22 strike I free up an additional 3000 for a total of 7600 in free capital. Added to the Jul 21 buy to close I have a total of 18100.00 now available for naked puts. As I believe more selling is coming I will hold off selling more puts to see if Intel pulls back below $20.00
    12.00   8812.00 1112.00 12.61 2376.75

June 18 2010:

It has been an exciting month for the market and for stocks like Intel. The volatility increased in late May and added high premiums for options. This is where my strategy really shines. I follow specific companies and over a period of time, you can get a "feel" for the stock. Intel at 16.00 would be a great buy, but looking at the past few months, the chance of intel falling below 19.00 is not very great. Therefore any move to $20.00 or lower gives me confidence to buy some of the stock for a quick bounce, and to sell out of the money naked puts. Case in point is May 25 2010, when I bought 1000 shares on the decline, at $20.20 and sold July $17 puts for .31 or 1.8%. Imagine owning this stock at 17.00! In the meantime, the market bounced around and Intel jumped back up to 21.50 just 2 days later, allowing for a quick profit of $1286.00 or 6% for two days work. I find making decisions such as these are next to impossible unless I am in a handful of stocks and have watched them for years.
On the day of the "flash crash", the stock hit $19.90, so I knew the chance of the stock retesting that low was a very good. I waited and sure enough within two weeks the stock was testing those lows and I bought my shares. If the stock had not recovered but instead moved into a new trading range, I would have turned to covered calls, because at $20.20, the stock was a very good buy. Just to mention it again, I believe an investor has to pick a handful of quality companies, that pay dividends, study them, set in place a plan, test it and over time implement that plan. The only change comes when the stock or the company changes. Then it is time to re-evaluate and decide on a course of action including possibly leaving the stock for another better performing stock
..
 

Jun 18 10 21.40 Expiry: 10 Naked Puts Jun 19 expired
See my comments below for Jun 18 2010
               
Jun 22 10 20.90 STO 5 NP JUL 20 @ .38
Comments: Following my strategy as detailed out in Jun 18 below, I sold the $20 strike naked puts as I think at 20 or below would be good strike and if caught in the money I am confident I can roll the 20 strike for some time.
    13.25   10013.25 176.75 1.76 2553.50
Jun 23 10 20.32 STO 5 NP AUG 17 @ .30     13.25   8513.25 136.75 1.60 2690.25
Jul 1 10 19.10 STO 5 NP AUG 17 @ .33
Comments: With the downturn in stocks I think Intel will have a hard time falling much below 19.00. I have 10 Jul 17 Naked Puts that will expire is about 2 weeks. Baring a disaster, I am sure they will expire worthless. Meanwhile though, I had to sell in May for Jul 17 in order to get .31 on the puts, whereas right now I can sell the next month out for the same amount, thereby setting myself up for an extra month of income from selling naked puts just 1 month out rather than 2. As well by adding 5 naked puts at the same strike in August, I am actually reducing the total amount of capital I will have exposed to Intel, after the July options expiry.
    13.25   8513.25 151.75 1.78 2842.00
Jul 9 10 20.04 STO 10 NP JUL 19 @ .17     19.50   19019.50 150.50 0.79 2992.50
Jul 16 10 21.02 Expiry: 10 NP JUL 19 expired / 5 NP JUL 20 expired / 10 NP JUL 17 expired                
Jul 30 10 20.88 BTC 10 NP AUG 17 @ .04     19.50     (59.50) (0.34) 2933.00
Jul 30 10 20.88 STO 7 NP AUG 20 @ .35     15.75   14015.75 229.25 1.63 3162.25

August 10 2010:

Looking at the chart, the 19 strike is a good price point to consider for naked puts. If I take out the rising trend in the stock (which occurred from the March 2010 to the May 2010 period which I have done in a blue box), it is easy to see that if Intel stays in a trend, the best premiums for writing naked options could stay at the 19.00 strike for the put side and if I was interested in selling naked calls I could consider selling the 23 strike on any rise. Right now however I will be staying with just selling naked puts as earnings have been strong for Intel and I have never sold naked calls on tech stocks before. My strategy for Intel has always been naked puts. I have always found it important to stay with a strategy that I have confidence in. Selling naked calls on Intel is not part of my strategy, but looking at the chart I can see the potential.  Presently I am still holding 4 October 22 naked puts and I will roll those as I approach October unless they end up in the money. With the present market outlook, I would expect this stock to stay in a trend with support somewhere around 19.00 and resistance perhaps at 22.00

Here is what went on today:

(Reuters) - Shares of Intel Corp and Advanced Micro Devices Inc fell on Tuesday after analysts downgraded shares of the world's top chip maker, warning of a weakening outlook for corporate and consumer IT spending globally. Robert W. Baird and Barclays said they expected a subdued third quarter for Intel , even though Intel and competitor Advanced Micro Devices Inc said last month they expected a strong three months. Government austerity measures in Europe are causing cautious companies to rein in PC outlays in anticipation of a slowdown in consumer spending, analysts said. Gartner on Tuesday said it expects worldwide enterprise IT spending to grow by 2.9 percent this year, down from the 4.1 percent the research company had earlier forecast.

"What we're seeing now is more of a cyclical correction, but we see some very good growth trends for PCs in the next few years," Baird analyst Tristan Guerra said. Intel controls about 70 percent of the processor market and derives about 90 percent of its revenue from the PC market. Its shares fell 3.4 percent, while AMD's dropped 7 percent. Barclays downgraded Intel and AMD to "equal-weight" from "overweight," saying its Asian industry checks found that broader PC trends for the third quarter have continued to remain subdued, and seasonal sales guidance "may prove bold." AMD and Intel's seasonal third-quarter guidance of 7 percent to 8 percent sequential sales growth could prove elusive, Barclays said. It said PC shipments may be up in a range closer to 5 percent to 7 percent versus the normal 15 percent-plus range, reflecting more subdued demand from Europe, a slowing China, and cautious U.S. consumers, as well as rigorous inventory management following overzealous ordering in the first half of 2010.

 

Aug 10 10 19.90 STO 5 NP Sep 19 @ .42     13.25   9513.25 196.75 2.0 3359.00
Aug 20 10 18.90 Expiry: BTC 7 NP AUG 20 @ 1.10     15.75     (785.75) (5.60) 2573.25
AUG 20 10 18.90 Expiry: STO 6 NP OCT 20 @ 1.57     14.50   12014.50 927.50 7.71 3500.75
AUG 31 10 16.75 Bought 1000 shares @ 17.77
Comments: I am buying at this point just for a quick trade as I believe at 17.77 this stock is undervalued.
    7.00 (17777.00) (17777.00)      
Sep 3 10 18.25 Sold 1000 shares @ 18.41     7.00 18403.00 0.00 626.00   4126.75

Sep 10 2010:

I have received many emails from worried investors regarding Intel. First I would like to point out that the chance of Intel cutting its dividend is I think, nil. Next, where is Intel headed? To get a better picture I have gone back to the five year chart. The average 5 year lows were $16.75 and following the crash in 08-09 the stock quickly recovered to 16.75 again. This marks an important support. Based on volume, the majority of buy and hold investors are sitting between 16.50 and 19.00. In 08-09 when the market crashed, Intel was scooped up when it hit lows of 12.05 and 12.07. Intel is back under pressure and looking at the chart, it is now sitting within support zones. If it falls below 17.00 I believe it could quickly fall below the 16.75 level and probably trade around 15.50 to 16.50. At those levels Intel would make for some interesting naked put selling as that would open up the $14 and $13 put strikes for selling with what could be good premiums.

Meanwhile with my goal of continuing to bring income in and eventually accept shares, I rolled my October puts today. Here is what I did and why.

1) My OCT 22 puts are now deep in the money. I originally sold them for 2.81. Remember this was originally 5 June 23 put contracts and I reduced them to 4 Oct 22 put contracts for a small credit. Now that they are deep in the money, it will be difficult to roll them with a credit and reduce the number of contracts. However as I have puts at other levels I can use them to reduce my number of contracts and still end up with a small credit.

I rolled the 4 contracts Oct 22 puts to 3 contracts Apr 22 puts which created a loss of $262.75. That loss then has to be made up somewhere. Meanwhile though, this frees up $2200.00 in capital for more naked puts.

2) My OCT 20 puts are now also in the money. Again, this was originally 7 naked puts Aug 20 which I rolled to 6 contracts for Oct 20. Now I have rolled this to 5 contracts APR 20 for a gain of $232.25. This frees up 2000 of capital (1 contract was reduced in the roll from Oct to April) for more naked puts.

This means the total loss by these two rolls was $30.50. To make this up AND reduce my share valuation in Intel I sold 3 Naked Puts JAN 15 at .44 which in the end gave me a profit of 90.75 on the roll and places my share valuation at 19.18 (without taking into account the income made to this point). This places my position right in line with the Sept 19 puts I am still holding. As Sept options expiry advances I will probably roll to Jan 19 for a small credit and reduce the number of contracts by 1.

Following all of this I have moved my positions back to within the upper range of where the majority of shareholders are and continued to earn income from my puts. Perhaps by the end of next year (2011) I will have earned an additional 4000 in income. I hope by the time 3 or 4 years passes I will have made enough to own the shares without using my original capital.

                     
Sep 10 10 17.96 BTC 4 NP OCT 22 @ 4.05     12.00   8812 (1632.00) (18.52) 2494.75
Sep 10 10 17.96 READ MY COMMENTS BELOW UNDER SEPTEMBER 10 2010
STO 3 NP APR 22 @ 4.60
COMMENTS: This is a roll of 4 contracts from Oct 22 to 3 Contracts Apr 22. This reduces my exposure in Intel and frees up 2200.00 in capital to sell more puts.
    10.75   6610.75 1369.25 20.71 3864.00
Sep 10 10 17.96 BTC 6 NP OCT 20 @ 2.15     14.50     (1304.50) (10.85) 2559.50
Sep 10 10 17.96 STO 5 NP APR 20 @ 3.10
COMMENTS: This is a roll of 6 contracts from Oct 20 to 5 Apr 20. Again it reduces my exposure in Intel and frees up 2000 in capital to sell more puts.
    13.25   10013.25 1536.75 15.34 4096.25
    THESE TWO ROLLS (Oct 22 and Oct 20 to April) LEAVE A LOSS OF $30.50. That loss has to be made up. Meanwhile though I have freed up 4200.00 in capital for more naked puts.                
Sep 10 10 17.96 STO 3 NP JAN 15 @ .44
COMMENTS: This makes up the 30.50 loss and places my average share valuation at 19.18. See my comments below under Sept 10 2010.
    10.75   4510.75 121.25 2.68 4217.50
Sep 17 10 18.89 Expiry: BTC 5 NP Sep 19 @ .15     13.25     (88.25) (0.92) 4129.25
Sep 17 10 18.70 Expiry: STO 2 NP Oct 19 @ .71     9.50   3809.50 132.50 3.47 4261.75
Oct 4 10 18.80 STO 5 NP NOV 18 @ .49     13.25   9013.25 231.75 2.57 4493.50
Oct 15 10 19.32 Expiry: 2 NP OCT 19 expired                
Nov 5 2010: With the rise in Intel shares I have closed my Nov 18 puts and my Jan 15 puts. There is little point in keeping the funds held in reserve however at this level I am not convinced Intel has room to move a lot higher. I feel it is prudent to wait and see if there is a pullback which I can take advantage of to sell naked puts at strikes below 20. 
Nov 5 10 21.19 BTC 5 NP NOV 18 @ .02     13.25     (23.25) (0.25) 4470.25
Nov 5 10 21.19 BTC 3 NP JAN 15 @ .05     10.75     (35.75) (0.79) 4434.50

Nov 10 2010: This is why a plan is important and having historical charts to follow assist. Looking back to the beginning of this trade, the stock had recovered from the lows of the crash and were trading between 19 to 21. Then as in the past the stock moved higher reaching to the 24.00 level by April. Then recently a grind lower to the $18.00 level. Now the stock is turning back up. This is what we need to keep option premiums high enough to make trading put options worthwhile. Because I already know the history of the movements of this stock, when it rises or falls I am already prepared and can reduce my positions and roll them out and sell lower. Basically I am follow the stock up and down but staying far enough ahead to make it easy to not get assigned and keep bringing in more premium. The return this year will easily be above 15%.

 

Nov 19 10 20.90 STO 4 NP JAN 19 @ .24
Comments: I am continuing to stay below 20.00 as I think any weakness and there is a good chance this stock could fall back below 20.00
    12.00   7612.00 84.00 1.10 4518.50
    END OF 2010 - $4518.50  17.7%                
INTEL TRADES BY YEARS
VIEW INTEL-2011 TRADES
VIEW INTEL-2010 TRADES

 

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright © 2008

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