Collect an Instant $190 with this Intel Short Strangle

Intel (INTC) is currently showing above average volatility with an IV Percentile of 59% and an IV Rank of 39%.

INTC rates as a Strong Buy according to 2 analysts with 2 Moderate Buy ratings, 21 Hold, 1 Moderate Sell and 3 Strong Sell ratings.

Intel Corporation, one of the world's largest semiconductor company and primary supplier of microprocessors and chipsets, is gradually moving into data-centric businesses such as AI and autonomous driving. 

Intel is a dominant player for microprocessors in both consumer and enterprise markets. 

Data Center Group, Internet of Things Group, Mobileye, Non-Volatile memory solutions group and Programmable solutions Group and All Other business units form the crux of Intel's data-centric business model. 

DCG segment deals with servers, workstations and other products for cloud, enterprise, and communication infrastructure market. 

IOTG offers high-performance compute solutions and embedded applications. PSG segment offers programmable semiconductors, primarily FPGAs and structured ASICs. 

Mobileye is engaged in developing computer vision and machine learning-based sensing, data analysis, localization, mapping, and driving policy technology for ADAS and autonomous driving.

Today, we’re going to look at a short strangle trade due to the high IV percentile.

A short strangle aims to profit from a drop in implied volatility, with the stock staying within an expected range.

When implied volatility is high, the wider the expected range becomes.

The maximum profit for a short strangle is limited to the premium received while the maximum potential loss is unlimited. For this reason, the strategy is not suitable for beginners.

INTC SHORT STRANGLE

Traders that think INTC stock might remain stable over the next few weeks could look at a short strangle.

As a reminder, a short strangle is a combination of an out-of-the-money short put and an out-of-the-money short call.

The idea with the trade is to profit from time decay while expecting that the stock will not move too much in either direction.

For INTC stock, an August 18 put with a strike price of 31 could be sold for around $1.10.

Then the short call, placed at the 39 strike, could be sold yesterday for around $0.80.

In total, the short strangle will generate around $1.90 per contract or $190 of premium.

The profit zone ranges between 29.10 and 41.90. This can be calculated by taking the short strikes and adding or subtracting the premium received.

If price action stabilizes, then short strangles will work well. However, if INTC stock makes a bigger than expected move, the trade will suffer losses.

Conclusion And Risk Management

One way to set a stop loss for a short strangle is based on the premium received. In this case, we received $190, so we could set a stop loss equal to the premium received, or a loss of around $190.

Another way to manage the trade is to set a point on the chart where the trade will be adjusted or closed. That could be around 33 on the downside and 37 on the upside.

Please remember that options are risky, and investors can lose 100% of their investment. 

This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.

On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.