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Micron Technology, Inc. (MU) Bullish Bets Fly Off the Shelves

Micron Technology, Inc. calls are trading at more than twice the intraday norm

by 4/17/2014 10:52 AM
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Option Brief: Micron Technology, Inc. (NASDAQ:MU) is bucking the broad-market trend lower this morning, enjoying a post-earnings halo lift from sector peer SanDisk Corporation (NASDAQ:SNDK). The shares of MU are 4.4% higher at $23.46, and options traders are rolling the dice on more upside for the memory maker in the short term.

Already today, MU has seen roughly 67,000 calls cross the tape -- more than two times the average intraday volume. For comparison, around 29,000 MU puts have traded. Most active is the weekly 5/23 22.50-strike call, where more than 10,000 contracts have changed hands, primarily in a sweep just before 10 a.m. ET. The calls crossed at the ask price of $1.67 apiece, volume has surpassed open interest at the strike, and implied volatility is trending higher -- hinting at newly bought bullish bets.

By purchasing the calls to open, the buyer will make money if MU powers north of $24.17 (strike plus premium paid) by the close on Friday, May 23, when the options expire. Risk is capped at the initial cash outlay for the calls, should MU retreat and finish beneath the strike at expiration. However, the stock's Schaeffer's Volatility Index (SVI) of 39% sits just 12 percentage points from an annual low, implying that MU's short-term options are inexpensive right now, from a historical standpoint.

Not everyone on Wall Street shares the same optimistic outlook as the aforementioned call buyer, though. Short interest accounts for 11.9% of Micron Technology, Inc.'s (NASDAQ:MU) total available float, representing more than four sessions' worth of pent-up buying demand. Should the shares extend their recent rally -- MU is on pace for an 11% gain this week -- a rush to cover by the shorts could translate into contrarian tailwinds.


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