To The Moon

$Intel(INTC)$ 's stock has plummeted nearly 60% this year, making it one of the worst performers in the chip sector. Meanwhile, the S&P 500 has risen by nearly 20%, and the Philadelphia Semiconductor Index has surged nearly 30%.

Intel was a flagship enterprise in Silicon Valley. In the mid-1980s, Intel and Microsoft jointly ushered in the PC era, enabling Intel to become a global giant in the chip industry.

However, Intel isn't even the top earner in semiconductor revenue anymore. Its market cap has dropped below $90 billion, while Nvidia's market cap is approaching $3 trillion—over 30 times Intel’s.

$Taiwan Semiconductor Manufacturing(TSM)$ ’s market cap is close to $900 billion, ten times Intel’s. AMD, under Lisa Su, has seen its market cap soar to $240 billion, 2.5 times Intel’s, and even ARM, which only designs chips, has a market cap of $140 billion.

Intel is now collaborating with investment banks to navigate its toughest period in 56 years. The company is exploring options like splitting its chip design and manufacturing divisions and canceling some factory projects.

On August 30, Intel’s stock jumped nearly 10%, signaling positive market response to its self-help measures. If investors want to bet on Intel’s recovery, they might consider a bull call spread strategy.

What is a Bull Call Spread?

The Bull Call Spread strategy refers to investors buying call options with a lower strike price while selling call options with a higher strike, with both options having the same expiration date.

Compared to buying a call option alone, investors earn an additional premium income, which reduces the net premium expenditure of the overall strategy. Consequently, the break-even point of the strategy shifts to the left and lowers, and the winning rate increases accordingly. Essentially, it is a low-cost strategy for buying call options.

• Maximum profit: When the underlying asset price reaches or exceeds the higher exercise price, the maximum profit of the strategy is the difference between the two exercise prices minus the net option cost (i.e., the cost of buying options minus the income from selling options).

• Maximum loss: It is equal to the cost of buying call options minus the income from selling call options (i.e., the net option cost).

• Limited risk and limited return: Compared to buying call options directly, the risk and return of the bull call spread strategy are both limited. Its maximum loss is known and equal to the initial net option cost.

It is suitable for investors who believe that the underlying asset price will rise moderately but not significantly. It can be used in markets with lower expected volatility to profit by reducing option costs.

Example of a Bull Call Spread Strategy on $Intel(INTC)$

Intel's current price is $22. Suppose you believe Intel will rise to $30 within the next six months.

• Step 1: Buy a call option with a strike price of $30 at a cost of $113.

• Step 2: Sell a call option with a strike price of $40 at a price of $32.

• Net Cost: $113 - $32 = $81.

• Maximum Profit: $1,000 (strike price difference) - $81 (net cost) = $919.

• Maximum Loss: $81 (net cost).

This strategy offers limited downside risk while allowing for potential gains in a moderate bull market. If Intel hits the predicted $30, you could make up to $919 with just a $81 investment.

Even if the forecast doesn’t pan out, your maximum loss is limited to $81. For a company like Intel, which is currently facing uncertainty, a bull call spread is a cost-effective, low-risk strategy with the potential for high returns.