Call Players Flock to Micron Technology, Inc. (MU) on Poison Pill News

Calls are hot as Micron Technology, Inc. (NASDAQ:MU) eyes a key price level

Jul 25, 2016 at 12:15 PM
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Semiconductor stock Micron Technology, Inc. (NASDAQ:MU) is up 7.2% to $14.08, and its options pits are buzzing, after the company revealed a shareholder rights agreement -- a.k.a. poison pill -- which, according to analysts at Credit Suisse, "increases that possibility of strategic investment or acquisition in near term." The renewed M&A hopes have MU stock and options trading at breakneck speeds.

At last check, MU calls are changing hands at more than twice the expected intraday rate, with roughly 65,000 contracts on the tape. In fact, calls are outnumbering puts almost 9-to-1, and account for all 10 of the stock's most active options. In the lead by a wide margin is the weekly 7/29 14-strike call, where it looks like some recent call buyers have been selling to close their positions amid today's pop. The weekly 7/29 series, which expires this Friday, is popular in general today, with a mix of buy- and sell-to-open action spotted at the 13-, 13.50-, and 14.50-strike calls.

Today's preference for calls is an extension of what's been seen in MU's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have purchased more than six of the stock's calls for each put over the past 10 days. What's more, the resulting call/put volume ratio of 6.20 sits higher than 92% of the past year's readings. And this call-skewed trend is even more evident among near-term traders, per the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.36 -- an annual low.

It looks like short-term options buyers are getting quite a bargain at the moment, as well. MU's Schaeffer's Volatility Index (SVI) of 29% sits in just the 2nd percentile of its 12-month range, while its 30-day at-the-money implied volatility of 41.5% sits lower than 95% of all reading in the last year. This indicates historically low volatility expectations are currently being priced in.

Outside of the options pits, sentiment toward MU has been fairly bullish, but the stock has seen short interest creeping up lately, now representing 6.5% of its available float. And of the 22 analysts following the security, nine still rate it a "hold" or worse, leaving room for future upgrades, if the stock can keep its upward momentum going.

Shares of MU are currently seated just below the year-to-date breakeven mark, after a bounce off their rising 50-day moving average earlier this month. Furthermore, the stock is again doing battle with the $14 level today -- a price point that has caused trouble for Micron Technology, Inc. (NASDAQ:MU) over the past several weeks, after serving as support for the shares throughout late 2015.

MU Daily Chart July 25

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