History Suggests Micron Stock Could Stay Hot

MU stock has tended to reward premium buyers over the past year

Managing Editor
Nov 9, 2017 at 2:54 PM
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Semiconductor stocks have dominated headlines lately, thanks to Broadcom's (AVGO) unsolicited buyout bid for Qualcomm (QCOM) and news Intel (INTC) has acquired a former Advanced Micro Devices (AMD) exec. The sector will remain in focus following Nvidia's (NVDA) earnings report -- due after tonight's close -- and one chip stock that should not be ignored is Micron Technology, Inc. (NASDAQ:MU). Below, we will take a look at MU stock, and examine how options traders have been lining up.

At last check, Micron stock is down 2.1% to trade at $43.15 amid sector headwinds, despite earlier receiving a price-target hike from Citigroup to $51 from $45, territory not seen since September 2000. MU has added an astounding 151% year-over-year, and touched a 16-year high of $45.33 on Nov. 1. Plus, the shares have averaged a November-to-April gain of 7.55% since 2010, according to data from Schaeffer's Senior Quantitative Analyst Rocky White -- though not as impressive as their average May-to-October return.

In Micron's options pits, short-term speculators have shown an unusual preference for puts relative to calls. This is according to the security's Schaeffer's put/call open interest ratio (SOIR) of 0.67, which is ranks in the 88th percentile of its annual range.

Digging deeper, the November 37 put is home to peak front-month open interest. According to Trade-Alert, there has been a mix of buy- and sell-to-open activity here in recent weeks. Those buying the puts expect Micron stock to pull back by front-month options expiration at next Friday's close, while those writing the puts expect the $37 level to hold as technical support.

Historically speaking, Micron stock has shown a tendency to reward premium buyers -- at least according to its Schaeffer's Volatility Scorecard (SVS), which stands at a lofty 88. In other words, the shares have made bigger-than-expected moves over the past year, compared to what the options market has priced in.

 

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