Shares of Intel surged by 25% at the open following Nvidia’s $5 billion investment in Intel common stock. This comes as the companies announce a collaboration to develop custom data centre and PC products over multiple generations.
Intel’s shares have reached their highest level since July 2024 and have shown an increase of nearly 100% from this year’s low. Nvidia has pledged to invest in Intel at $23.28 per share, acquiring approximately 4% of Intel. This investment is a small fraction of Nvidia’s $4 trillion market cap.
Historic Collaboration
Intel will produce a custom Nvidia chip for data centres, alongside a PC chip, integrating Nvidia NVLink with both companies’ architectures. The collaboration is being described as a historic step toward combining Nvidia’s AI and accelerated computing stack with Intel’s CPUs.
The partnership is expected to expand ecosystems and lay the foundation for the future era of computing. Both companies have announced plans for a joint press conference at 1 pm ET.
With Intel shares jumping 25%, implied volatility in its options has exploded. We are likely seeing 30-day volatility for INTC skyrocket from the 40% range to well over 80%, making options premiums incredibly rich. Buying options outright is now prohibitively expensive, so the immediate focus shifts to strategies that sell this inflated premium.
For those who believe this new valuation will hold, we should consider selling cash-secured puts on any minor dip in the coming days. The massive premium collected provides a significant cushion and allows us to define a lower entry point if the stock does pull back. For example, weekly or monthly puts with strike prices around $22 or $23 are likely offering unusually high returns right now.
Option Strategies and Market Reactions
If we expect more upside but are wary of the high cost, bull call spreads are a logical approach. One could buy a November $24 call and sell a November $27 call to cap the cost and risk. This strategy profits if Intel’s stock continues to grind higher toward the levels we last saw in summer 2024, without paying the full price for elevated volatility.
This move feels similar to other major strategic investments we saw in the early 2020s, which often created a long-term support level for the target company’s stock. The speculation about a potential multi-year takeover path, even if distant, will likely keep downside risk limited in the near term. This strengthens the case for selling puts, as a full reversal of today’s gains seems unlikely.
Looking at the market data, call volume today has surged to over 15 times its 20-day average, with a heavy concentration in October and January expiration dates. The put-to-call ratio has plummeted below 0.4, a clear signal of overwhelming bullish sentiment following the announcement. We must watch to see if this extreme sentiment holds or if it creates an opportunity for contrarian plays after the initial excitement fades.
