MU – Micron Technology, Inc. – Bullish options strategists dominated activity on the manufacturer of semiconductor devices today ahead of the firm’s third-quarter earnings report slated for release after the closing bell this evening. Micron’s shares rallied as much as 6.2% to touch an intraday high of $10.05, and are currently up 5.50% at $9.98 as of 1:00 pm (ET). Investors looking for solid third-quarter earnings to fuel a rally in the price of Micron’s shares sold puts and purchased calls on the stock today. Meanwhile, near-term action centered at the July $10 strike where traders initiated long positions in both call and put options. Put buyers picked up at least 3,200 lots at the July $10 strike for an average premium of $0.56 each. Investors long the puts are prepared to profit should Micron’s earnings disappoint, and shares of the underlying stock slip beneath the average breakeven price of $9.44 by July expiration day. Bullish individuals scooped up about 3,300 calls at the same July $10 strike for a premium of $0.47 apiece. Another 1,500 calls were picked up at the higher July $11 strike for an average premium of $0.15 per contract. Call buyers are well positioned to benefit should Micron’s shares rally following the release of MU’s third-quarter earnings report. Waves of put selling by bullish investors took place in the August and October contracts. Optimistic options traders shed 2,000 puts at the August $8.0 strike for an average premium of $0.22 apiece, sold 3,000 puts at the August $9.0 strike for an average premium of $0.45 each, and sold another 2,500 in-the-money puts at the higher August $10 strike for an average premium of $0.90 a-pop. Investors keep the premium received today if Micron’s shares trade above the strike prices previously detailed through August expiration day. Similar short positions were initiated in the October contract at the $8/$9/$10 strikes. Traders sold 2,100 in-the-money puts at the October $10 strike to pocket an average premium of $1.23 each. As with all plain-vanilla put selling, investors short puts at the October $10 strike walk away with the full $1.23 premium per contract as long as Micron’s shares trade above $10.00 through October expiration. Put sellers at this strike price are obliged to have shares of the underlying stock put to them at an effective price of $8.77 each in the event that the puts land in-the-money at expiration. Finally, bulls also purchased another 4,500 calls at the October $10 strike for an average premium of $1.12 per contract. Investors make money on the acquisition if MU’s shares rally 11.4% over the current price of $9.98 to surpass the average breakeven point on the calls at $11.12 by expiration day in October. Options implied volatility on the stock is down 5.5% to 54.65% as if 1:20 pm (ET) despite impending third-quarter earnings from the company.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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