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How Micron Technology, Inc. (MU) Bulls Placed Winning Bets

Micron Technology, Inc.'s top trade from yesterday is already in profitable territory

by 1/14/2014 10:32 AM
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Option Brief: Micron Technology, Inc.'s (NASDAQ:MU) options pits weren't particularly busy yesterday, but one popular strike was the February 20 call. Nearly 21,000 contracts traded here -- including several large and mid-sized blocks -- making it far and away Monday's most active option for MU.

The vast majority of the contracts crossed the tape at the ask price, suggesting they were purchased. In addition, open interest surged by 19,229 contracts overnight, pointing to the initiation of new bullish bets.

With Micron Technology up 1.6% today to perch at $23.71, the aforementioned option is not only in the money, but in profitable territory. After all, the volume-weighted average price (VWAP) of yesterday's typical trade was $3.65, putting breakeven at $23.65 (strike price plus VWAP). However, if the semiconductor stock dives below the strike by options expiration, the speculators who have held onto their long call positions will lose the entirety of the initial premium paid.

Historically, Micron Technology, Inc. (NASDAQ:MU) is a technical outperformer. The shares have more than tripled in value on a year-over-year basis, helped by a post-earnings bull gap and a round of bullish brokerage notes on Jan. 8. In the wake of that gap higher, the stock also hit an 11-year high of $24.50.


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