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Micron Technology (MU) Bull Climbs On for the Long Haul

MU's January 2015 15-strike calls were bought to open yesterday

by 7/17/2013 10:42 AM
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Micron Technology, Inc. (NASDAQ:MU) has been a technical titan in 2013, with the shares up a staggering 112%. This impressive price action has not been lost on option traders, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the course of the past 10 sessions, speculators on these exchanges have bought to open 163,849 MU calls, compared to 16,249 puts. What's more, the resultant call/put volume ratio of 10.08 ranks in the 97th percentile of its annual range, indicating calls have been accumulated with greater rapidity just 3% of the time within the past year.

It's a trend that continued on Tuesday, when around 105,000 calls changed hands, or nearly nine times the number of puts that crossed the tape. Nearly a quarter of the day's call volume traded in one fell swoop at the January 2015 15-strike call for the ask price of $2.27. Open interest soared by 26,002 contracts overnight, and data from the ISE confirmed that the LEAPS were, indeed, bought to open.

Based on the entry price, the trader will begin to profit with each step north of $17.27 (strike plus the premium paid) MU takes through January 2015 expiration. This breakeven mark resides 28.3% above the equity's current perch at $13.46. Delta for the call is docked at 0.53, meaning for every dollar MU adds over the next year-and-a-half, this option will gain $0.53. Conversely, for every dollar MU sheds, the call will lose $0.53.

As touched upon, Micron Technology, Inc. (NASDAQ:MU) has had a stellar run on the charts of late. From a longer-term perspective, however, MU has not traded north of $15 since December 2006. Should the equity continue to trade south of this mark throughout the lifetime of the aforementioned calls, the most Tuesday's bullish speculator stands to lose is the initial premium paid.


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