Micron Stock Sinks on Chinese Antitrust Allegations

One options trader may be targeting a big move for MU stock

Nov 19, 2018 at 9:57 AM
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The shares of Micron Technology, Inc. (NASDAQ:MU) are down 2.2% to trade at $38.58, after the Financial Times reported Chinese investigators alleged "massive evidence" of antitrust violations against the U.S.-based chipmaker, as well as South Korea's Samsung Electronics and SK Hynix. A Wall Street Journal report that Apple (AAPL) cut production orders for its new iPhones is likely adding to the bearish bias, after concerns over slumping iPhone demand sent MU stock tumbling last Monday.

Today's negative price action echoes the equity's long-term trajectory, with MU stock off 40% from its late-May peak. The security's 30-day moving average has applied steady pressure, and has capped two rally attempts this month. However, history points to a short-term breakout for Micron, considering its been one of the best stocks to own during Thanksgiving week over the past decade.

While the broader trend has been bearish in MU's options pits in recent weeks, one speculator on Friday appears to have bet on a big move in the near term, regardless of direction. Specifically, it looks as if one speculator bought to open matching blocks of December 39 calls and puts, initiating a long straddle for $5.20 per pair of options.

If this is the case, the options trader expects MU to rally past the upper breakeven rail of $44.20 (strike plus premium paid) or to breach the lower breakeven rail of $33.80 (strike minus premium paid) by the close on Friday, Dec. 21, when front-month options expire. This time frame includes Micron's earnings report, schedule for after the close on Monday, Dec. 17. Over the last two years, the stock has averaged a next-day post-earnings move of 6.2% in either direction.

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