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Call Buyers Make a Beeline for Micron Technology

MU fans are flocking to February-dated calls

by 1/3/2013 1:51 PM
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The shares of Micron Technology, Inc. (NASDAQ:MU - 6.95) are trading solidly higher this afternoon, and it looks like the options crowd is expecting even more upside for stock. So far today, MU has seen around 36,000 calls cross the tape -- about three times its average intraday call volume, and more than double the number of puts exchanged.

The majority of the action transpired at the February 8 call, which has seen more than 10,500 contracts traded on open interest of fewer than 850 contracts, hinting at fresh initiations. The bulk of the calls crossed in one fell swoop, with a block of 10,250 contracts exchanged at the ask price of $0.10, suggesting they were bought.

In order to profit on the play, the call buyers need MU to topple the $8.10 level (strike plus premium paid) -- in territory not charted since early April -- within the next couple of months. At the equity's current price, it would take a rally of about 16.5% in order to hit breakeven. However, even if MU remains south of recent resistance in the $7 neighborhood, the most the buyers can lose is capped at the initial premium paid for the calls.

Broadening our sentiment scope, we find that today's appetite for short-term bullish bets is nothing new for MU. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.35 indicates that calls nearly triple puts among options expiring within three months. Furthermore, this ratio sits just 13 percentage points from a 52-week nadir, suggesting near-term options players have rarely been more call-biased during the past year.

At last look, MU has advanced 4.7% to wink at the $6.95 level, after a judge yesterday barred Rambus (NASDAQ:RMBS) from enforcing 12 of its patents to demand royalties from MU, citing "intentional, widespread, advantage-seeking and concealed" destruction of evidence by RMBS officials. As alluded to earlier, though, the equity continues to stare up at the $7 level, which hasn't been conquered on a daily closing basis since mid-April.


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