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Micron Technology, Inc. (MU) Trader Bets on a Long-Term Range

Breaking down a short straddle strategy on Micron Technology, Inc.

by 2/5/2014 10:18 AM
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Option Brief: Micron Technology, Inc. (NASDAQ:MU) has almost tripled in the past year, and now sits at $23.32. However, one option trader is expecting the shares to stay relatively range-bound over the next several months, and implemented a short straddle strategy.

Around midday yesterday, symmetrical blocks of 5,800 contracts changed hands at the January 2015 25-strike call and 25-strike put, each marked "spread." Both sets of options crossed at the bid price -- the calls at $3.00, the puts at $4.90 -- suggesting they were sold. Plus, open interest rose on both sides of the strike overnight, and the International Securities Exchange (ISE) confirms sell-to-open activity.

By writing both calls and puts at the 25 strike, the speculator expects Micron Technology, Inc. (NASDAQ:MU) to remain close to $25 through January 2015 options expiration. In the best-case scenario, the options will expire worthless, allowing the seller to retain the entire net credit of $7.90 per pair of options. Meanwhile, the position will begin to lose money if MU breaches one of two breakeven rails: $17.10 (strike minus net credit) or $32.90 (strike plus net credit), the latter of which would represent a new record high for MU.


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