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Micron Technology (MU) Bulls Bet On End-of-Week Gains

Micron Technology, Inc.'s weekly 7/25 34-strike calls were popular yesterday

by 7/24/2014 9:45 AM
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Micron Technology, Inc. (NASDAQ:MU) call volume quadrupled put volume yesterday -- 80,000 contracts to 20,000. Roughly one-quarter of the calls that changed hands did so at the weekly 7/25 34 strike -- MU's most active option -- as speculators wagered on a modest advance in the shares by week's end.

Digging deeper, roughly 18,900 contracts traded at the aforementioned strike. Since the majority crossed at the ask price, and open interest soared overnight, it's safe to assume the calls were bought to open at a volume-weighted average price (VWAP) of $0.20. Thus, the option players expect MU to be sitting above breakeven at $34.20 (strike plus VWAP) tomorrow night, when the weekly contracts expire. Gains are theoretically unlimited north of breakeven; by contrast, the traders' maximum risk is the initial premium paid, which they'll lose if the shares are sitting below the strike at Friday's closing bell.

On Wednesday, Micron Technology, Inc. (NASDAQ:MU) finished fractionally higher at $33.68, following the announcement of a $1.15 billion offering of 5.50% senior notes. From a longer-term perspective, the stock has outperformed the market -- up more than 150% year-over-year -- and tagged a fresh 12-year high of $34.85 last week.


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