INTC strangle: the breakevens nobody quotes

Both legs are pure extrinsic value, so the strangle is a leveraged bet that INTC travels further than 85% implied vol says it will over 27 days. Between the strikes at expiry, both expire worthless and you lose the entire $614.

The payoff is a valley: flat max loss between $78 and $108, then linear gains once past the breakevens at $71.86 and $114.14. Max profit is unlimited.

Compared with the straddle at the same expiry, you pay less and need more. That is not a free improvement — it is a different bet, with a lower probability of profit (32% here) and a bigger multiple when it works.

Gamma is lower than a straddle's while the stock sits between the strikes, so the position responds sluggishly to the first part of a move and then accelerates. Traders consistently underestimate that lag.

Max loss $614 is the base case, not the tail. The stock finishing anywhere between $78 and $108 — the range it spends most of its life in — wipes out the position.

Post-event IV crush hits both legs at once. A strangle bought into earnings can lose money on a move in the right direction if the vol collapse is bigger than the delta gain.

The decay is relentless and it is front-loaded against you in exactly the window most retail traders hold. A long-vol position with no exit plan is a slow, fully-predictable loss.

Intel's realized vol has repeatedly exceeded its implied on foundry and subsidy headlines that arrive without warning. That is the profile long-vol traders look for, and the reason the front month is not as expensive as the risk suggests.

INTC's Aug 28 strikes are $2 apart near the money (2.22% of spot). On a ladder that wide, "pick the 0.30 delta strike" resolves to whichever rung happens to be closest — sometimes not close at all. 18k contracts of open interest on Aug 28 is workable around the money and thin in the wings — width costs more here than the ladder suggests. 32 strikes on that expiry — 47% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Liquid near the money with a fine ladder; the far wings carry stale prints more often than the volume suggests.

Skew is inverted: the 25-delta CALL implies 6.5% more vol than the put. That is the market pricing upside risk above downside risk — a squeeze, a takeover rumour, or a crowded short. Owning upside on an inverted skew means paying the expensive side of the surface, which is worth knowing before you buy the call. The term structure is backwardated — Aug 28 implies 3.1% MORE vol than the following month. That is the signature of a dated event inside the front month, and it is the strongest argument for picking the expiry that sits behind it.

At 85% ATM implied vol, the Aug 28 options are pricing a one-standard-deviation move of $20.95 over 27 days — roughly −23.2% to +23.2%, or $69.25 to $111.15. Owning vol here means believing INTC covers more than 23.2% in 27 days, and covering it in time.

What actually goes wrong here, as opposed to in general: Reading a low share price as low risk. The percentage moves here are semiconductor moves; the dollar amounts just make them easier to underestimate.