Intel Corporation (NASDAQ:INTC) steps up to release its third-quarter results this Thursday. The company has a history of topping Wall Street’s quarterly results, and lowered expectations amid a resurgent Advanced Micro Devices, Inc. (NASDAQ:AMD) has set the bar pretty low.

As such, when it comes INTC stock, guidance is everything.

What traders will really be looking for is how Intel will protect its dominance in servers and PCs while tackling the red-hot artificial intelligence (AI) market. AMD has made a significant play for the server and desktop PC market this year, though the company warned that revenue would decline in the fourth quarter.

It provides a window of opportunity for Intel, especially with the new “Coffee Lake” chipset arriving on the scene soon.

While AMD is battling for old-tech market share, Nvidia Corporation (NASDAQ:NVDA) is dominating the future right now. The firm has taken a commanding lead in AI technology, and Intel cannot afford to miss this opportunity the way it botched the mobile market.

Intel is making headway on that front, even partnering with Facebook Inc (NASDAQ:FB) to develop the Nervana Neural Network Processor. The new chip is focused on accelerating “deep learning,” which is an AI term for computers that can recognize objects in photos, understand spoken words and other tasks that would typically require human judgment.

While investors largely expect Intel to rise to the AMD challenge, this new market threat from Nvidia will be the biggest driver for Intel share price going forward. Any news on this front will go a long way toward bolstering INTC stock.

As for third-quarter numbers, an earnings beat for Intel is widely expected. Wall Street is currently looking for a profit of 80 cents per share on revenue of $15.73 billion. Both figures are relatively on par with last year’s results. Historically, Intel has topped expectations in every quarter for the past two years.

With the bar already set low, this quarter should be no exception. In fact, EarningsWhispers.com puts the whisper number at 82 cents per share.

Speaking of expectations, Wall Street has grown hesitant on Intel stock. According to Thomson/First Call, 22 of the 43 analysts following INTC rate the shares a “buy” or better. Meanwhile, the 12-month price target rests at $40.80. This situation bodes well for INTC, as it creates ample room for potential upgrades or price-target increases.

Click to Enlarge And INTC stock could use both, given its current technical outlook. Intel has been on a tear since the beginning of September, with the shares up more than 16%. While investors are cheering the rally, it has left INTC stock heavily overbought heading into earnings. The shares are trading at levels last seen during the dotcom boom, and could be vulnerable to a sell-on-the-news event following earnings — even with analyst support.

As such, it is not surprising that INTC options traders are cautious ahead of tomorrow’s report. The November put/call open interest ratio has risen to a near-term high of 0.91, with puts on the verge of overtaking calls among front-month options. Speculative traders are clearly expecting a bit of short-term weakness for INTC.

Overall, November implieds are pricing in a potential move of about 4.9% for INTC stock following earnings. This places the upper bound at $43 and the lower bound at $39. A drop below $40 would be a short-term bearish move for INTC stock, while any additional gains with the shares in multiyear high territory would be a bullish long-term signal.

2 Trades for INTC Stock

Put Spread: Traders looking to take advantage of a sell-on-the-news event due to INTC’s overbought status might want to trade a Nov $39.50/$40 bear put spread. At last check, this spread was offered at 15 cents, or $15 per pair of contracts. Breakeven lies at $39.85, while a maximum profit of 35 cents, or $35 per pair of contracts — a potential return of 133% — is possible if INTC stock closes at or below $39.50 when November options expire.

Call Spread: On the other hand, traders looking for a solid quarterly performance, strong guidance and plenty of support from the brokerage community might want to consider a Nov $42/$42.50 bull call spread. At last check, this spread was offered at 12 cents, or $12 per pair of contracts.

Breakeven lies at $42.12, while a maximum profit of 38 cents, or $38 per pair of contracts — a potential return of 216% — is possible if INTC stock closes at or above $42.50 when November options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.