Chip stocks have surged 15% from their 2018 lows in early February, and at least one trader is of the opinion Intel (NASDAQ: INTC) is the chip name to buy.
Commentator Todd Gordon says the company dubbed "Mr. Chips" is seeing an "expanding volatility pattern." In this case, the stock is making higher highs and lower lows, creating a sort of reverse wedge. "In most cases you get a triangle, which is a consolidating pattern, this is an expanding volatility pattern," he said.
To trade this move up to $55, which would be a multiyear high for Intel, Gordon wants to look at a butterfly spread. The trade essentially has Gordon selling two calls at the same strike at the body of the butterfly, and then buying one call at a higher price, and one at a lower price.
In a butterfly spread, a trader would make the maximum reward if the stock closed at the price of the butterfly's body. For Gordon's trade, this means that should Intel close at $55 on April 1, he could make a maximum reward of $335.
Meantime, Intel is currently the target of a class-action lawsuit, involving alleged violations of the 1934 Securities Act. Investors who purchased the Company's shares between July 27, 2017, through January 4, 2018, inclusive, have been encouraged to contact the legal firm involved in the case before March 12
Shares in Intel were trading mid-morning Friday up 48 cents, or nearly 1%, at $51.22, within a range of $33.23 and $52.08.
