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Micron Technology, Inc. (MU) Sees a Rare Uptick in Call Volume

MU's January 2014 10-strike calls are being targeted today

by 5/8/2013 2:47 PM
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Micron Technology, Inc. (NASDAQ:MU) is following in the bullish footsteps of the broader equities markets today, with the stock up 1.7%. The positive price action hasn't been lost on option traders, with roughly 35,000 calls crossing the tape thus far -- nearly double the average intraday volume. By comparison, fewer than 9,500 puts have changed hands. A number of today's traders are eying extended gains over the long term, and are picking up the stock's January 2014 10-strike calls for a volume-weighted average price (VWAP) of $1.46. The majority of these calls have traded at the ask price, and implied volatility was last seen higher, hinting at buy-to-open activity.

While today's upward momentum has pushed these LEAPS into the money, traders will not become profitable until MU topples the $11.46 mark (strike price plus the VWAP). This breakeven mark sits roughly 13% above the stock's current perch at $10.14.

However, data collected from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals that traders have been accumulating puts with some rapidity in recent weeks. Specifically, Micron Technology's 10-day put/call volume ratio of 0.46 ranks in the 86th percentile of its annual range, meaning puts have been bought to open over calls at a faster-than-usual clip.

As such, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.82 ranks in the 70th percentile of its annual range. Simply stated, short-term speculators are more put-heavy than usual toward the equity. In the front-month series of options, this has translated into peak put open interest at the May 8 strike, where 22,742 contracts currently reside.

Technically, shares of Micron Technology, Inc. (NASDAQ:MU) have nearly doubled since hitting an annual low of $5.16 on Oct. 24. This impressive price action has been highlighted by the stock's 50-day moving average, which has provided MU with a lift going back to late November. In light of this technical tenacity, the withstanding trend toward puts could simply represent investors picking up some options-related insurance against a potential pullback. As it turns out, today's move higher has MU flirting with its upper Bollinger Band.


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