Options Trader Bets on Monster Micron Move

Micron earnings are expected in mid-December

Nov 18, 2019 at 3:03 PM
facebook twitter linkedin


Micron Technology, Inc. (NASDAQ:MU) is slated to report earnings in mid-December, and the chip stock has a history of making big post-earnings moves -- averaging a next-day swing of 7.2% over the last two years. One options trader on Friday wagered on another volatile earnings reaction for Micron, initiating a long straddle in the front-month series.

Looking closer, one speculator bought to open 10,000 December 55 calls and 10,000 December 55 puts for an initial cash outlay of $7.94 million (10,000 spreads * $7.94 premium paid * 100 shares per contract). By doing so, the trader expects MU to surge above $62.94 (strike plus net debit) or sink below $47.06 (strike less net debit) by the close on Friday, Dec. 20, when the options expire. However, if the stock lands right at $55 when the options expire, the spread strategist will forfeit the entire premium paid.

More broadly speaking, options traders have struck a bullish tone toward Micron. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.35 registers in the 75th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

It's certainly an attractive time to purchase premium on MU options. The stock's Schaeffer's Volatility Index (SVI) of 42% arrives in the 19th percentile of its 12-month range, meaning short-term contracts are pricing in relatively low volatility expectations at the moment -- ideal for long straddles, which require buying double premium.

On the charts, Micron shares have been gaining ground since bouncing from familiar support in the $42 region in early October -- home to their pre-bear gap levels from July. More recently, last week's slip was quickly contained by MU's 80-day moving average, and today, the equity is up 0.4% at $47.88, bringing its year-to-date gain to 50.9%.

mu stock daily price chart on nov 18

 

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

 
Schaeffer's Daily Bulletin Offer
 


 


 
Special Offers from Schaeffer's Trading Partners