Posted by: ctraderd | April 15, 2013

$INTC Earnings Play

Let’s start off with some background on Intel Corporation (INTC).

We are the world’s largest semiconductor chip maker, based on revenue. We develop advanced integrated digital technology, primarily integrated circuits, for industries such as computing and communications. Integrated circuits are semiconductor chips etched with interconnected electronic switches. We also develop computing platforms, which we define as integrated hardware and software computing technologies that are designed to provide an optimized solution. Our goal is to be the preeminent computing solutions company that powers the worldwide digital economy. We are transforming from a company with a primary focus on the design and manufacture of semiconductor chips for PCs and servers to a computing company that delivers complete solutions in the form of hardware and software platforms and supporting services.

We were incorporated in California in 1968 and reincorporated in Delaware in 1989. (Source: http://www.intc.com/corpInfo.cfm)

INTC is expected to report earnings tomorrow, Tuesday, April 16th after the closing bell with an estimated EPS of $.41/share. In recent quarters, INTC has had pretty steady sales, so I am confident that they will continue this trend with a sales revenue somewhere around $13.5 billion for this quarter. Gross income has been deteriorating on a four quarter trend, so I expect the amount to be around $7.5 billion and for the most important item, net income has been also deteriorating since the first quarter of 2012. I believe that INTC’s net income will be somewhere around the range of $2.3 billion. In my opinion, INTC will post earnings probably around the estimates of $.41/share.

In order to play INTC’s earnings, I entered an Apr13 21.5 Straddle, in which I bought 10 of each the Apr13 21.5 Calls and Apr13 21.5 Puts. I bought the Calls at $.51 and am currently down –$120 for –23.5%. However, I bought the Puts at $.36 and am up +$140 for +38.8%. Overall, I am up +$20 on the straddle. My gameplan for these is to exit the losing position right away on Wednesday, April 17th at the open, and let the winning position ride. I will then determine when to sell the winning position as the day goes on.

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