Schaeffer's 43rd Anniversary Stock Picks in 2024

2 Chip Stocks To Buy During Thanksgiving Week

Micron stock has added 152% year-over-year

Managing Editor
Nov 16, 2017 at 3:12 PM
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Semiconductor stock Broadcom Ltd (NASDAQ:AVGO) has been all over headlines lately, for its efforts at an unsolicited buyout bid for Qualcomm (QCOM). Micron Technology, Inc. (NASDAQ:MU), on the other hand, is a red-hot chip stock that has been slightly more under the radar. Both stocks found themselves on our list of best stocks to own during Thanksgiving week. Below, we will take a look at AVGO and MU, and examine how options traders have been lining up toward the chip stocks.

Broadcom Stock Poised To Reclaim Record Highs

Broadcom stock is currently up 2.4% to trade $271.95 and has tacked on 62% year-over-year. According to Schaeffer's Senior Quantitative Analyst Rocky White, AVGO has an average return of 3.11% during Thanksgiving week over the past ten years, and has been positive 88% of the time. Movement of similar magnitude would have Broadcom stock testing its Nov. 6 high of $281.80.

Options trading has been call-heavy in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AVGO sports a 50-day call/put volume ratio of 2.15, which ranks in the 93rd percentile of its annual range.

Digging deeper, the December 270 call is home to peak open interest, and a mixture of buy-to-open and sell-to-open activity looks to have taken place, according to data from the major options exchanges. Those buying the calls are expecting Broadcom to continue its current uptrend, while those writing the calls see the $270 level as a ceiling until the options expire on Friday, Dec. 15.

Micron Stock Has Room To Run

Micron stock is up 1.4% to trade at $46.02, after earlier today touching a 16-year high of $46.22. The chip stock has tacked on an impressive 152% year-over-year, and according to White, MU has an average return of 4.83% during Thanksgiving week over the past ten years, and has been positive 80% of the time.

Despite Micron's current uptrend, put buying has been more popular than normal in recent weeks. ISE/CBOE/PHLX data shows MU with a 50-day put/call volume ratio of 0.29, which ranks in the 88th percentile of its annual range. Should Micron stock continue to rise, it could lead to an unwinding of these bearish bets.

Furthermore, 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 90. 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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