Micron Stock Sees a Surge of Call Buying Ahead of Earnings

Though earnings season has mostly wrapped up, memory chip maker Micron Technology, Inc. (NASDAQ:MU) will report its fiscal fourth-quarter results after the close tomorrow night. Micron has a history of making outsized moves following its earnings reports. Below, we will take a look at how Micron stock typically reacts after earnings, and how options traders are preparing for the big event.

Historically speaking, MU stock has averaged a one-day move in either direction of 7.6% in the session following the firm's last eight earnings releases, per Trade-Alert. The stock has reacted negatively five times, including a 5.1% post-earnings dip on June 30. Heading into Micron's earnings, the options market is pricing in a larger-than-usual one-day swing of 13.2% for Wednesday's trading.

In the options pits, it appears traders are betting on a positive earnings reaction for Micron shares. The October 35 call is home to peak open interest, with over 90,000 contracts outstanding -- and data from the major options exchanges confirms buy-to-open activity.

Today, the October 40 call has garnered the most interest, with over 32,000 contracts exchanged. It looks like new positions are being purchased here, suggesting options traders' are anticipating MU will climb past the $40 mark by expiration at the close on Friday, Oct. 20. The $40 level represents an area the stock has not reached since August 2001. 

At last check, MU stock is down 4% today to trade at $34.62, falling with its sector peers after Intel revealed its new Core desktop processors. The chip stock has been a consistent outperformer for some time, though, nearly doubling in value year-over-year.

Plus, the stock shot to a 15-year high of $36.60 last Wednesday, and the shares' rising 30-week moving average has contained any pullbacks since June 2016. Not surprisingly, there is overwhelming optimism surrounding MU in analyst circles -- 16 out of 17 rate the stock a "buy" or "strong buy."