Intel Stock Rating and Buying Strategy (NASDAQ:INTC)


Intel Corporation (NASDAQ:INTC) has become an attractive stock for purchase consideration. The stock currently is rated at the top by MSN’s StockScouter rating, and it is forecasted that growth stocks will be in favor, large-cap stocks will be in favor, and technology stocks will be in favor. When it comes to actually buying and putting your hard earned investment dollars into the stock, that can be a tougher pill to swallow.

We present you with an alternative to provide some insurance on your stock purchase. Based on rates recently checked, buying 100 shares of Intel Corporation (NASDAQ:INTC) for $20.80/share and then selling the $21.00 January 2011 Call contract for $0.81 could net you 5.05% profit if INTC closes above $21.00/share at the expiration date in 72 days. Not bad for 2 months of investing and your average monthly gain would be 2.14%. Additionally, you would have downside protection to $19.99, or about a 3.9% drop in stock price.

The Compound Annual Growth Rate (CAGR) on the assigned option position is 28.4%, which is better than the average overall long-term market return of 10%.

What to do if INTC drops 3.9% and closes below $21.00:
If INTC closes below $21.00 at any time during the trade& you can roll down the position by purchasing back the $21.00 January 2011 Call contract and then selling another call at a lower strike (say the $19.00 strike) and/or further date out to make up for any losses caused by having to buy the $21.00 January 2011 Call back. If the stock recovers& you likely can simply sell out of the position for close to even money if you don't want it tied up in the positions.

If shares of Intel Corporation (NASDAQ:INTC) continue to drop, you now own the stock for less than $19.99/share when you were originally interested in buying at $20.80/share. That seems like a pretty sound investment.

Intel Stock Rating and Buying Strategy (NASDAQ:INTC)

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