Micron Options Bulls Make a Rare Appearance During Sell-Off

Traders appear to be buying to open weekly 5/4 calls

May 2, 2018 at 3:03 PM
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While Apple suppliers trade higher following the iPhone maker's quarterly report, chip stock Micron Technology, Inc. (NASDAQ:MU) is sinking. The shares were last seen down 1.7% at $46.01, after the chief financial officer of Apple, Luca Maestri suggested NAND prices could drop and DRAM prices are "near the peak." Nevertheless, a number of options traders appear to be betting on a quick bounce.

Amid a relatively low volume session, roughly 85,000 calls and 46,000 puts have traded so far on Micron. Most active is the weekly 5/4 47.50-strike call, with more than 9,000 contracts on the tape. It seems likely that new positions are being purchased here for a volume-weighted average price (VWAP) of $0.26. If this is the case, breakeven for the call buyers at this Friday's close is $47.76 (strike plus VWAP).

This upbeat outlook isn't shared by all options traders, though. In fact, around 10:30 a.m. ET, it looks as if one bearish bettor may have rolled her long June 45 puts down to the 39 strike, indicating expectations the shares will breach the $39 level over the next six weeks.

It's this bearish positioning that echoes the broader trend seen in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MU's 10-day put/call volume ratio of 0.43 ranks in the 93rd annual percentile. While this shows more calls than puts have been bought to open over the past 10 sessions on an absolute basis, it indicates the rate of put buying relative to call buying has rarely been quicker.

Looking at the charts, MU stock sold off quickly in the wake of its mid-March 17-year high of $63.42. The shares are now trading below the $47.50 mark, which is home to a 61.8% Fibonacci retracement of their February through March surge, and near Micron's 120-day moving average -- a trendline that's carried the equity higher since May 2016.

mu stock price chart may 2


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