Earnings Preview: Micron Technology, Inc. (MU)

Option bulls are banking on a post-earnings boost for Micron Technology, Inc. (MU)

Oct 3, 2016 at 11:58 AM
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Semiconductor stock Micron Technology, Inc. (NASDAQ:MU) is set to release earnings tomorrow night, and option bulls are closing in. While the stock has moved lower in five of the past eight post-earnings sessions, it looks like option players are betting on an upside swing this time around.

MU's average single-session swing after earnings for the past eight quarters has been 6.2%. Option players seem to be betting on a slightly bigger move this time, however, with pricing in a 10% move in either direction, according implied volatility data.

So far in 2016, MU is up by over 26%, gaining support from its 10- and 20-day moving averages since July. Currently, however, the shares seem to be running into resistance at the $18 level, which are roughly double its 2016 lows, and about half of MU's 2014 highs.

MU 161003

In the option pits, MU contracts are trading at approximately two times their usual intraday pace, with calls doubling puts, and with total option volume set to touch the 96th percentile of its annual range. Today's most popular option is the weekly 10/7 18-strike call, which saw considerable buy-to-open action last week, implying option buyers are hopeful that MU can make a post-earnings swing above the critical $18 level that currently contains the shares.

Bullish MU bets aren't uncommon as of late, with eight of MU's 10 top open interest positions being calls, with the October 20 call leading the front-month options. MU's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 3.8 indicates nearly four call options have been bought to open for every put option over the past 10 weeks, and this ratio sits in the 80th percentile of MU's annual range. In addition, MU's Schaeffer's put/call open interest ratio (SOIR) of 0.47 sits in the lower quadrant of its annual range, suggesting short-term option players have rarely been more call-skewed over the last 12 months.

It would seem the optimism towards Micron Technology, Inc. (NASDAQ:MU) isn't confined strictly to the option pits. Analysts are also keen on the stock, with 10 of 16 rating rating the shares a "buy" or better. In fact, just this morning Barclays upped its price target on the shares to $23 from $19. Given that MU has outperformed the greater S&P 500 Index (SPX) by 38.4 percentage points over the last 60 sessions, this warm sentiment isn't too surprising.  

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