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Although Micron Technology, Inc. (NASDAQ:MU) has rallied 56% this year -- and 140% over the past 52 weeks -- to trade at $33.86, sentiment around the Street remains skeptically skewed toward the stock. In the options pits, for example, the most active MU strike on Wednesday was the October 35 put, where 9,368 contracts changed hands. All of these traded at the ask price, implied volatility edged higher, and open interest rose overnight -- all signs of buy-to-open activity.
Based on MU's present perch, these puts are in the money. However, in order for the put buyers to profit, the stock must be perched below breakeven at $31.60 (strike less the volume-weighted average price of $3.40) at the close on Friday, Oct. 17, when the options expire. Gains will accumulate on a move down to zero, while risk is limited to the initial premium paid, should the stock be north of the strike at expiration.
As noted, though, this bearish bias isn't limited to the options pits. Specifically, short interest has surged more than 50% over the past 52 weeks, and now accounts for roughly 117 million shorted shares. Not only is it impressive that the stock has rallied to 12-year peaks in the midst of this selling pressure, but it would take one week to cover these shorted shares, at Micron Technology, Inc.'s (NASDAQ:MU) average daily pace of trading. From a contrarian perspective, as the stock continues to notch a string of higher highs, an unwinding of this bearish sentiment could help fuel the fire.