Intel Stock Crashed 31%, Then $18 Million in Puts Hit the Tape

[00:00:00] Speaker 1: Intel dropped 29% at the open and then 18 and a half million dollars of puts at the tape. Welcome back to Signal vs. Noise where we take a look at unusual options activity and ask the question what's the market really saying beneath the move? Today's name has got to be Intel IMTC which is down now 31% in the market here today. At the time that this was recorded shares are trading around $63.66 and within five minutes this morning we spotted two unusually large bearish footprints crossing for combined $18.5 million in premium. Now the timing naturally invites the bearish interpretation. After a move this violent traders are paying for another leg lower or maybe shareholders are finally paying to protect what's left in their positions. The tape gives us evidence for both possibilities but it doesn't let us collapse these two positions into one confirmed bears thesis. Nevertheless let's go see what's going on. The larger print was $2,643 of the January 15th, 2027. $1.20 puts at $54.55 roughly $14.4 million in premium. Now that trade goes aside which is consistent with someone buying the put. Its expiration break even is $65.45 which is almost exactly where Intel is trading right now so the buyer of this doesn't really need more of a crash here per se for the trade to work at expiration. The important detail is how far in the money this option already is. Roughly $54.13 of the $54.55 price was intrinsic value leaving only about $0.42 of time value here. Now five minutes earlier, $8,000 of the September 17th, 2027, 322 days to expiration. $50 puts crossed at $5.10 under the $4.1 million in premium there. Now if those were bought the break even would be around $44.90 which requires another 31% decline from where the price was trading around execution at $65.23. This is a more aggressive downside scenario right. The catch on the September trade is that it's a bit of a cross with no confirmed side so I honestly can't say for sure if it's a bearish purchase here. The corporate context that we usually talk about at this point in these signal versus noise videos may just be the price action itself. Where do we go from here? Intel has suffered a near 31% decline which dramatically changes how we would read any of these deep in the money put. Somebody buying the 120 strike after a collapse isn't necessarily looking for Intel to fall that much further from here. They're simply replacing stock exposure perhaps with something that has almost stock-like downside sensitivity but defined risk. Now the same contract also makes perfect sense as insurance around an existing loan position perhaps. If an institution or individual trader already owns millions of dollars of Intel stock paying up for a put whose premium is almost entirely intrinsic value can protect the portfolio without forcing them to liquidate shares into a panic. The option exposure itself is bearish but the investors total portfolio does not need to be. Now I don't have the consensus analyst expectations segment for this particular figure because they've been getting re-rated all day long. Across the morning I've seen Bank of America, JP Morgan, Goldman Sachs name out of the hat have put out a note about Intel's earnings and talk new downside scenarios. So before we give the full this is where the street stands right now let's give everyone the chance to catch up but I will say the targets that we're setting up near 120, 130, 140, 150, they're all coming down. They're coming down fairly aggressively. When we think about the strike sun, the January 120 put is basically sitting on the stock's current value after accounting for premium. The January 50 put is asking Intel to trade below 45. One is structured around preserving today's depressed price. The other purchase is paying for another significant impairment over the next 11 months and I think just recognizing those two factors is more important than saying how far afield the stock has moved from the current Wall Street consensus. One that is going to be very different by the time we talk about Intel next in one of these videos. And that is probably why these strikes were chosen. That January 120 put gives the shareholder immediate downside protection without paying much extrinsic value. It's almost a synthetic way to lock in today's stock price while retaining whatever upside exposure exists elsewhere in the portfolio. The September 50 contract is a little bit different. If they're long, it's a much cheaper way to express the idea that these 29% decline is not the end of the story. The volume in the September line was 13,312 contracts. Big volume here today. Again, reported open interest of only 3,737, but volume above open interest still does not necessarily prove that those contracts are newly opened alone, although we're leading in that direction. The Friday open interest update will tell us considerably more. Until then, the correct language is this is the scenario we're dealing with, right? We're not saying this is definitely the occurrence here. So what's the signal of the noise then? Because there seems to be a lot of noise here. Is 18.5 million to put premium on the same day Intel loses 30 plus percent, telling us that some more sophisticated institutional buyers see more downside ahead? Or is the biggest trade simply the shareholder paying the most no time value to hedge a position after one of the ugliest sessions Intel has had in its lifetime while the more bearish $50 put does not have a direction yet? Let us know your thoughts in the comments below. This has, of course, been another episode of Signal vs. Noise. Like and subscribe for more videos from Tasty Life. [00:05:24] Speaker ?: Thank you.