Stock Options Watch: MU, VNDA, MW

MU – Micron Technology, Inc. – Options traders appear to be snapping up out of the money call options on Micron Technology this morning ahead of the company’s third-quarter earnings report after the closing bell today. Shares in the name kicked off the trading session in rally mode, rising as much as 2.6% to a six-year high of $14.11 in the early going, but have since turned negative to stand 0.15% lower on the day at $13.73 as of 11:10 a.m. ET. Micron’s shares are up roughly 130% since this time last year. July expiry call options are seeing the most volume as of the time of this writing. Notable fresh interest is building in the Jul $16 and $17 strike calls, with more than 23,000 contracts in play at each. It looks like much of the volume in the $16 strike calls was purchased for an average premium of $0.44 apiece, while bulls paid an average premium of $0.26 each to get long the Jul $17 strike calls. Traders long the $16 strike calls stand ready to profit at expiration next month should shares in MU rally 16.5% over today’s high of $14.11 to top the average breakeven point at $16.44, while the $17 strike calls make money given a more than 22% move in the price of the underlying to $17.26 by July expiration. Overall options volume of 187,000 contracts on Micron is well above the stock’s average daily level of around 111,000 contracts less than two hours into the trading day. Heavy trading traffic in MU calls has pushed the call/put ratio to 4.0 as of 11:25 a.m. in New York.

VNDA – Vanda Pharmaceuticals, Inc. – Shares in Vanda Pharmaceuticals are getting slammed on Wednesday; down 24% at $8.31 as of 11:25 a.m. ET after an article written by The Street’s Adam Feuerstein highlighted potential concerns about the design of Vanda’s phase III studies of its sleep disorder drug, tasimelteon. Vanda’s shares last week traded up to $13.30, the highest level since September of 2009. One options trader appears to be taking a longer-term bullish view on the drug maker, initiating a 1,400-lot Dec $10/$18 call spread for a net premium outlay of $1.70 per contract. The spread starts making money if shares in Vanda reverse course and rally more than 40% to exceed the effective breakeven price of $11.70, with maximum potential profits of $6.30 per contract available should the stock surge 115% to top $18.00 by December expiration.

MW – The Men’s Wearhouse, Inc. – Options volume on apparel retailer, Men’s Wearhouse, is running at more than twice the stock’s average daily level as of midday in New York today after the company announced the ousting of founder and chairman, George Zimmer. Shares in the name are down 2.4% at $36.58 as of 12:10 p.m. ET. Put options are outpacing calls, with the put/call ratio hovering around 4.1, as some traders brace for shares in MW to extend losses. July expiry puts are seeing the most volume, with fresh interest concentrated at the $36 and $37 strikes. Upwards of 1,400 contracts are in play at each strike as of the time of the writing. Traders appear to have purchased most of the Jul $35 strike puts for an average premium of $0.80 apiece, and may profit at expiration if shares in MW slump 6.5% from the current level to breach the average breakeven point at $34.20. Time and sales data suggests mixed trading in the Jul $36 strike puts, with roughly equal numbers of contracts purchased and sold.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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