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Micron Technology, Inc. (MU): New High Sparks a Flood of Call Activity

Micron Technology, Inc. call volume is trading at an accelerated clip today

by 6/17/2014 11:23 AM
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Option Brief: Another day, another new high for Micron Technology, Inc. (NASDAQ:MU), which earlier tagged the $32.45 mark -- its loftiest perch since April 2002 -- before easing back to its present price of $32.15. Not surprisingly, calls are trading at a 53% mark-up to the intraday average, and are outpacing puts by a 2-to-1 margin. Given the stock's fresh technical peak, a number of call players are targeting the $33 mark, although differing in their forecasts of how MU will react near this area.

In the front-month series, MU's June 33 call has received notable attention. Of the 2,392 contracts traded here, two-thirds have gone off on the ask side, and implied volatility was trending higher at last check -- two indications new positions are being purchased. Data from the International Securities Exchange (ISE) also suggests a portion of the day's activity is of the buy-to-open kind.

The volume-weighted average price (VWAP) for the calls is $0.17, making breakeven at Friday's close -- when the options expire --- $33.17 (strike plus VWAP). Gains are theoretically unlimited with each additional step north of here, while losses are capped at 100% of the premium paid, should the stock fail to finish above the $33 mark at expiration. With more than 10% of MU's float currently sold short, a portion of today's call buying at this deep out-of-the-money strike could be at the hands of shorts hedging against any higher highs the stock may reach by week's end.

Also of interest is a potential roll-up from the weekly 7/3 series to the July series of options. According to the ISE, one block of 500 weekly 7/3 31-strike calls was bought to close, while a symmetrical block of July 33 calls was sold to open. In other words, now that MU has moved comfortably north of $31, this option trader had to readjust her outlook and forecast a new short-term ceiling for the semiconductor concern.

On the fundamental front, Micron Technology, Inc. (NASDAQ:MU) is slated to step into the earnings confessional after next Monday's close. Over the past eight quarters, MU has fallen short of analysts' bottom-line expectations five times. For Micron's fiscal third-quarter, Wall Street is calling for a per-share profit of 68 cents -- a 64-cent improvement over the company's year-ago results.


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