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Most Active Options Update: Micron Technology, Inc. (MU)

Micron Technology, Inc. traders gamble on another 12-year high

by 5/21/2014 1:36 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Micron Technology, Inc. (NASDAQ:MU).


Calls have outpaced puts in Micron Technology, Inc.'s options pits recently by a roughly 4-to-1 margin. Specifically, the stock's 20-day call/put volume ratio -- which measures buy-to-open activity at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- sits at 3.73.

In today's session, the margin is slimmer, but calls still have a roughly 8,000-contract lead over their put counterparts. The most sought-after option is MU's weekly 5/30 28.50-strike call, where 5,208 contracts have changed hands -- 78% at the ask price, hinting at buyer-driven activity. Meanwhile, volume easily exceeds current levels of open interest at the out-of-the-money strike, indicating the initiation of a fresh batch of bullish bets.

Delta on the call is docked at 0.17, suggesting a slim 17% chance of an in-the-money finish at next Friday's close, when the options expire. If the equity is still south of $28.50 at expiration, the most the speculators stand to lose is the initial premium paid. However, should MU stage a rally over the next week or so, gains for the call players are theoretically unlimited.

One reason that delta may be docked so low for the aforementioned call is that MU has not traded north of $28.50 since April 2002. This isn't to say the stock has suffered on the charts, though, with the shares up around 147% on a year-over-year basis. What's more, MU hit a 12-year peak of $27.78 as recently as May 13. In today's session, the equity is continuing to run higher, up 1.7% at $26.99, following reports that its DRAM customers are seeking out extended purchasing contracts.

Despite this strong technical showing, sentiment outside of the options pits tends toward the skeptical side. Short interest, for example, accounts for 11.4% of the equity's float. (As such, some of the recent call buying could be a result of short sellers hedging against any additional upside.) Plus, eight out of 20 covering analysts maintain a "hold" or worse rating on the stock. A pair of bullish brokerage notes levied toward MU by RBC earlier this week could be signaling a change in tune among analysts, though. From a contrarian perspective, a capitulation by short sellers and/or an additional round of upgrades could help Micron Technology, Inc. (NASDAQ:MU) extend its trek into multi-year-high territory.

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