We are starting our options trading activities this week with technology stocks as we explore the options of Intel Corporation (NASDAQ:INTC) because the company is hoarding the headlines today. We will then revisit the performance of the options of cybersecurity stocks that we covered in May.
Why Are We Looking at Intel Today?
Intel is hot in the news today after it revealed that it has reached a definitive agreement with Altera Corp to purchase the company for $16.7B in cash. The Altera acquisition is part of Intel’s effort to consolidate its position in the semiconductor industry.
It might interest you to know that Intel is keen to protect its chips for server systems market, a segment that accounted for more than half of Intel’s operating profit in the last quarter. Hence, Intel is confident that combining its chips and manufacturing processes with Altera’s field-programmable gate array (FPGA) technology will help in delivering innovative products for the Internet of Things market.
How to Trade INTC Options
The shares of Intel traded contrary to expectations on the news, as the stock was recording 1.31% in losses to $34.01 as at 10:11AM EDT. Nonetheless, Intel is on track to develop a profit-spinning synergy from the acquisition. However, we trade stock options based on the prevailing market sentiment of the underlying stock and not on the potentials of the company’s fundamentals. Hence, the fact that the market is not thrilled with the news suggests that it might be smart to buy INTC put options.
In addition, the chart above shows how the shares of Intel Corporation had met resistance at the $35 mark in the last one year. The fact that the stock couldn’t breakout above the $35 resistance suggests that we can expect the shares of Intel to trade some more under the range. I recommend buying INTC put options. You’ll do well to consider the INTC Jan 2016 35.000 put (INTC160115P00035000) at an asking price of $3.15.
Quick Update on the Options of Cybersecurity stocks
On May 15, I wrote about buying the call options of Fortinet, in a post in which I said that the underlying stock had enticing prospects. I then recommended buying FTNT Sep 2015 39.000 call (FTNT150918C00039000) at an asking price of $2.35. As at 9:42AM EDT today, that options contract was commanding an asking price of 3.20 to mark a 36.17% increase in two weeks. Stay in the game for more gains.
On May 18, I wrote about buying the call options of Palo Alto Networks, in a post in which I said that the underlying stock had a 50% upside potential. I then recommended buying the PANW Dec 2015 155.000 call (PANW151218C00155000) at an asking price of $15.50. As at 9:57AM EDT today, that options contract was commanding an asking price of 26.40 to mark a 70.32% increase in two weeks. Stay in the game for more gains.
On May 19, I wrote about buying the call options of Check Point Software Technologies, in a post in which I said that the underlying had consistent quarterly outperformance. I then recommended buying the CHKP Jul 2015 87.500 call (CHKP150717C00087500) at an asking price of $2.10. As at 9:57AM EDT today, that options contract was commanding an asking price of $1.13 to mark a 46% decline. I have already sold to close when the stop/limit order was triggered at $1.80. Cut the loser loose.
— Daily Option Alerts