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Micron Technology, Inc. (NASDAQ:MU) jumped 2.5% yesterday, spurring speculators of all types to make their way to the security's options pits. Specifically, 76.000 calls and 25,000 puts crossed the tape throughout the course of the session.
Among the most active MU options was the January 2015 20-strike call. All 5,853 contracts traded here did so off of the ask, for a volume-weighted average price of $1.13, implying that they were purchased. In addition, open interest added new positions overnight, which -- along with data from the International Securities Exchange (ISE) -- indicates activity of the buy-to-open nature.
Also receiving heavy traffic on the call side was the April 2014 20 strike, where a block of 4,780 changed hands at the ask price of $0.50. With Trade-Alert marking the block as opening, and open interest increasing overnight, we can assume the contracts were bought to open.
In order for yesterday's long-term call buyers to profit from their plays, MU has to topple the breakeven prices of $21.13 and $20.50 -- which is the strike price plus the ask price for each option -- by the respective January 2015 and April 2014 expiration dates. To do this, MU -- currently docked at $13.44 -- has to climb at least 57.2% over the next 17 months, and 52.5% over the eight months, respectively. Should the stock fail to finish north of the 20 strike upon the aforementioned expirations, the most the call buyers risk losing is the initial premium paid.
In today's trading, delta for the January 2015 call is sitting at 0.32, indicating a roughly 1-in-3 chance of an in-the-money expiration. Odds are slimmer for the April call buyers, given the present delta of 0.19, or 19%.
Technically speaking, Micron Technology, Inc. (NASDAQ:MU) has more than doubled on the charts since the beginning of 2013. What's more, the stock reached a new seven-year high of $15.07 on Aug. 14. In today's session, however, the equity was last seen trending 1% lower.