Huge, Unusual In-the-Money Call Option Volume in Intel Stock Today Shows Investors Bullish

Today, Intel Corp. (INTC) stock is showing huge, unusual in-the-money (ITM) call options volume. It shows that investors are bullish on INTC stock over the near term.

INTC is at $135.25, down over 3.0% today and off its peak closing price of $140.94 yesterday. However, it's up from a June 5 low of $99.17.

The heavy volume in Intel call options can be seen in today's Barchart Unusual Stock Options Activity Report. It shows that heavy trading has occurred in three tranches of in-the-money (ITM) INTC call options expiring this Friday, June 26.

These tranches are for call options with strike prices at $87, $88, and $77 per share. These are well below today's stock price, so there is already intrinsic value in the options. That is typically done by investors buying call options.

Moreover, the volumes are extremely high, indicative of institutional buying. For example, the $87.00 call option has over 47x the prior number of outstanding call option contracts.

As a result, these call options have high premium prices. For example, the $87.00 call option has a midpoint premium of $48.65, although the latest price was higher at $49.15.

So, adding $49.15 to $87 equals an all-in cost of $136.15, which is slightly higher than its midday price today of $135.25:

  $136.15 / $135.25 = 1.006654 -1 = 0.006654, or 0.665% higher

So, investors buying these calls hope to see INTC stock rise almost 1% to $136.15 by Friday. If not, their call option will still have an intrinsic value of $48.25, giving the investor a slight loss:

  $49.15-$48.25 = $0.90 loss or -1.83% (i.e., $0.90/$49.15).

The bottom line is that this is a way for investors who want to be long INTV over several days to set a buy-in price they are comfortable with for the long term. Let's look at why.

Fair Market Value for Intel Stock

I discussed Intel's price targets in an April 26 Barchart article after its April 23 earnings release, “Intel Could Still Be Undervalued Based on Strong Free Cash Flow.” My price at the time was $100.70, based on its strong free cash flow (FCF). For example, I estimated that Intel could generate $5.1 billion in FCF next year.

However, since then, analysts have significantly raised their revenue forecasts from $63.72 billion to $65.34 billion. That could raise its FCF forecast, using a higher 8.5% FCF margin, to:

  $65.45b x 0.085 = $5.55 billion FY 27

As a result, using a 0.75% FCF yield metric (again improved over a 1.0% FCF metric last time), its fair market value (FMV) could be:

  $5.55b / 0.0075 = $740 billion FMV

That is stretching its value, but it represents an 8.7% upside to today's market cap of $680.67 billion, according to Yahoo! Finance's calculations.

That sets a price target of $147.00 per share (i.e., $135.25 x 1.087).

Summary and Conclusion

However, much of this forecast will depend on Intel's outlook for this year and next year in its upcoming July 23 Q2 earnings release.

However, many other analysts are less sanguine about Intel stock's underlying value. 

For example, the average price target of 48 analysts surveyed by Yahoo! Finance is $94.75, and Barchart's mean survey price is $94.86. 

In fact, 32 analysts surveyed by AnaChart show a recent average of $69.08.

The bottom line is that investors are willing to buy INTC in-the-money (ITM) call options today, believing that Intel could be worth more by Friday.