Chip Stock Picking Up Steam Ahead of Earnings Report

MU is also seeing attractively priced premiums, even with earnings looming

Deputy Editor
Sep 29, 2020 at 11:25 AM
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Micron Technology Inc (NASDAQ:MU) is gearing up for its fiscal fourth-quarter earnings, due out after the close of today's session, and things are looking up for the chipmaker ahead of the event. At last check, the stock is up 1.6% at $50.54, rising above the stiff $50 level -- one of many breakout attempts over the past week. Below, we will take a look at how the equity has performed on the charts as of late, and explore some of the options activity surrounding Micron stock ahead of the event. 

When we last checked in with MU, the stock was rising after Goldman Sachs upgraded the equity to "buy" from "neutral." Since then, Micron stock has had an interesting run on the charts, trading mostly between $48 and $51. Meanwhile, the equity's 40-day moving average is in place to capture any future pullbacks. Longer term, MU boasts an 18.6% year-over-year lead.

MU Chart September 29

Meanwhile, MU's options pits are call heavy. In fact, the equity sports a 50-day call/put volume ratio of 3.03 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That ratio sits in the elevated 83rd percentile of readings from the past 12 months, implying a healthier-than-usual appetite for long calls of late.

Although earnings are right around the corner, options seems like a decent way to go at the moment. Micron stock's Schaeffer's Volatility Index (SVI) of 56% stands in the 25th percentile of its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

Looking back, MU saw positive next-day returns after five of its last eight earnings reports, averaging a swing of 7.2% regardless of direction -- including a 5.4% pop back in March, followed immediately by a 4.8% jump in June. This time around, the options market is pricing in a slightly larger move of 10.5%.


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