Intel Extends Record-Breaking Rally, as Gamma Squeeze Fuels Momentum

$Intel(INTC)$   shares extended their record-breaking rally Monday after a series of positive news fueled the gamma squeeze that's sending the stock on its way toward $130.

Last Friday, the Wall Street Journal reported that $Apple(AAPL)$   reached a preliminary agreement for Intel to manufacture some of the chips that power Apple devices, after an earlier report from Bloomberg stated that the two companies have been in talks for a deal. 

While the Apple partnership provides a fundamental spark, the speed of the recent move suggests a technical phenomenon known as a gamma squeeze could be the primary engine. In plain English, a gamma squeeze is a self-reinforcing cycle where rising stock prices force specialized traders called market makers to buy more shares to manage their own risk. 

As Intel's price surged toward $130, it crossed over a massive concentration of "call options"—contracts that give investors the right to buy the stock at a specific price, known as a strike price. According to exchange data tracked by moomoo, a substantial call wall exists at the $120 level, meaning a high volume of bets were placed that the stock could stay below that mark.

When a stock price blows past these popular strike prices, market makers who sold those options are suddenly at risk of losing money. To protect themselves, they must buy the underlying stock as a hedge, which inadvertently pushes the price even higher. This creates more demand, forcing even more buying in a feedback loop.

This news of a manufacturing deal with Apple follows Intel's first-quarter financial results on April 23 that showed the chipmaker delivering the biggest beat in revenue expectations since the fourth quarter of 2021. Revenue for the three months ended March grew 7.2% to $13.58 billion, surpassing Bloomberg consensus that called for $12.36 billion. 

Before the blowout results, $Tesla Motors(TSLA)$   CEO Elon Musk said his company plans to use Intel's 14a process for some core manufacturing technologies that will be deployed for Terafab. 

"By the time Terafab scales up, 14A will be probably fairly mature or ready for prime time," Musk said during Tesla's earnings call with analysts on April 22.“14A seems like the right move, and we have a great relationship with Intel.” 

This mechanical buying is being amplified by extreme levels of implied volatility. Implied volatility is a measurement that shows how much the market expects a stock to swing. Intel's implied volatility has reached 99.02%, according to exchange data tracked. The IV percentile now sits at 100%, a level that indicates the highest cost for options protection in at least a year.

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