How to create a 24% artificial profit in Intel (INTC) stock using options

Intel Corp (INTC) stock broke above its 50-day moving average on Monday and is showing positive accumulation on the breakout.

One bad thing about INTC stock is that it doesn’t currently pay a dividend.

But what if we could use options to generate our dividend?

Let’s say I have $4,500 to invest in INTC stock, I can simply buy 100 shares and hope the stock goes up.

But, if I wanted a more conservative play, I could sell the put on March 19, 2027 with a strike price of $45 and set aside $4,500 in the event that I was assigned to the short position.

This $45-strike generates about $885 in option premium over twelve months.

So, my $4,500 investment in INTC gives me a 23.9% annual “dividend”.

Like owning INTC shares, if the stock goes down, I will lose money in the short term.

If INTC is below $45 in March next year, I will be forced to buy 100 shares at $45.

The breakeven price is equal to the strike price less the premium received, which in this case would be $36.15, which is a 22.72% discount to the current stock price.

So if INTC is below $36.15, the trade loses money at expiration.

But, if INTC stays above $45 then I get 24% return per year when the money expires worthless.

Keeping cash safe is a superior strategy but somewhat less superior than owning INTC stock because the potential gains are limited to the premium earned.

The second risk with trading is that if INTC stock goes down a lot, we lose out on all sides. The most we can do is $885 from the option premium.

The $45 strike currently has a delta of 34, so selling this put is roughly equivalent to owning 34 shares of INTC stock, although this will change as the stock moves up and down.

This also means that the put has approximately a 66% chance of ending up worthless.

One method that can help reduce risk is to change the trade to a spread and buy the $35 strike. This turns the trade into a bull put spread and reduces the risk from $4,500 to about $1,000.

There are many interesting scenarios you can create with the options.

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

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

Data Center Group, Internet of Things Group, Mobile, Non-Volatile Memory Solutions Group and Programmable Solutions Group and other business units form the crux of Intel’s data-centric business model.

The DCG segment deals with servers, workstations and other products for the cloud, enterprise and telecommunications infrastructure market. IOTG provides high performance computing solutions and embedded applications.

The PSG segment offers programmable semiconductors, mainly FPGAs and structured ASICs.

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

The implied volatility is currently 62.62% compared to a twelve month low of 37.87% and a twelve month high of 94.69%.

Out of 45 analysts covering INTC, 5 have a strong buy rating, 1 has an average buy rating, 34 have a hold rating, 1 has an average sell rating and 4 have a strong sell rating.

Please note that options are risky, and investors can lose 100% of their investment. This article is for educational purposes only and not a business proposal. Remember to always consider yourself and consult your financial advisor before making any investment decisions.

As of the date of publication, Gavin McMaster had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com