Option traders betting on strong Intel results

*Investors favor November calls to bet on rosier picture

*Call-to-put daily volume ratio suggests "sea of optimism"

By Doris Frankel

CHICAGO, Oct 13 (Reuters) - Option traders in Intel Corp (INTC.O) appeared confident about the earnings outlook for the technology bellwether.

The world's largest chip maker will report results for the third quarter after the closing bell on Tuesday. Activity in the options has been bullish, with call option volume more than double the bearish put volume on expectations of strong results.

"Option traders are betting not only on positive earnings but perhaps more importantly, a statement of optimism on future earnings and growth from Intel," said Joe Kinahan, chief derivatives strategist at TD Ameritrade.

Wall Street is expecting earnings of 28 cents a share, excluding items, according to Thomson Reuters I/B/E/S.

The stock reached an intraday 52-week high of $20.69 a share earlier in the session. Investors still worry that corporate IT spending will not rebound until mid-2010, which could hurt the company's outlook. For details, see [ID:nN07495125].

By afternoon, option traders exchanged about 226,000 call options in Intel, nearly four times its average daily call volume and more than doubling the 89,000 puts traded, according to option analytics firm Trade Alert.

An equity call option gives the right to buy the company's shares at a fixed price within a specified time period. A put option conveys the right to sell the stock at a given price and time.

Particularly notable are the calls in the soon-to-expire October contract, with investors buying and selling premium at the $20, $21 and $22 strikes by Friday, said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.

"That suggests that investors do not see a large stock move for Intel post earnings and are deferring their optimism to the November contract," he said.

In the November $20, $21, $22 and even as high as the $23 call strikes, "option enthusiasts are predicting a rosier picture for Intel, where premiums were up on the day," he added.

The stock's option implied volatility, a barometer of anxiety and a key driver of an options price, stood at 39 percent in the afternoon, up 10 percent since Friday, Interactive Brokers data show.

Looking at the $20 straddle -- where an investor buys a call option and a put option at the same strike price and expiration date -- the expectation is for a swing of $1.10 after earnings, Wilkinson said.

Another gauge tracked by Schaeffer's Investment Research suggests a bullish outlook.

The 10-day call-to-put volume ratio tracking the opening purchases by investors on the Chicago Board Options Exchange and the International Securities Exchange, the two top U.S. option markets, shows investors leaning on the bullish side.

"The 10-day call-to-put volume ratio is at elevated levels, suggesting a sea of optimism for Intel heading into earnings," said Todd Salamone, senior vice president of research at options research firm Schaeffer's Investment Research.

The ratio is currently sitting at about five calls purchased for every put bought to open. Last week, six calls were purchased for every put, the highest level since November 2007. That could be a contrarian indicator, however, as the stock weakened after November 2007. (Reporting by Doris Frankel; Editing by Kenneth Barry)