Intel’s shares rose by more than 7% on Thursday. This followed a report by Bloomberg suggesting the US government might take an equity stake in the company.
The possible investment aims to aid the construction of Intel’s proposed chip complex in Ohio. This project, announced in 2022 with an initial investment of US$20 billion, could eventually reach US$100 billion.
The development has experienced delays amid Intel’s turnaround efforts. Intel chose not to comment on Bloomberg’s report.
The news of a potential government equity stake has already caused a significant jump in the stock today. We are seeing implied volatility in Intel options for the coming weeks surge, making both puts and calls more expensive. This reflects the market’s pricing in of a wider range of potential outcomes based on whether this investment is confirmed.
For those anticipating further positive developments, buying call options is a direct way to bet on the upside. However, with the current elevated volatility, we think using vertical call spreads can help reduce the upfront cost and protect against a drop if the report is denied. We saw a similar pattern back in 2023 when early news about CHIPS Act grants caused volatility spikes that later subsided.
We must also consider that this equity stake is not yet confirmed and the Ohio project has a history of delays since its 2022 announcement. Traders who believe the 7% rally is an overreaction could consider selling call credit spreads, betting the stock will not rise much further in the short term. This strategy benefits from both a stable stock price and the expected decline in implied volatility if no official announcement is made.
This development is especially critical as the Commerce Department’s rollout of CHIPS Act grants has been slower than anticipated, with only about $40 billion of the original $52.7 billion awarded as of last month. With competitors like NVIDIA up over 60% this year on AI demand, a direct government investment is seen as a major catalyst for Intel’s turnaround. Therefore, any official news in the coming weeks will likely cause another sharp move, making longer-dated options a consideration.
