Unusual Options Activity: Micron (MU)

Surge in calls expiring Friday.

The November 8th $52 call options on Micron (MU) saw over 2,700 contracts trade against a prior open interest of 256, an 11-fold surge in volume.

Given that the option expires on Friday, and with Micron shares around $49.50, shares of the company would need to rally another $2.50 for the option to close in-the-money. As market sentiment has improved on trade issues, tech companies like Micron could move that much higher this week.

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  • Action to take: Micron shares certainly look attractive, even near 52-week highs. On a valuation basis, shares trade at just nine times earnings, and fears of an earnings falloff have proven short-lived. We like shares up to $50, where they have plenty of long-term upside ahead, so there’s still a narrow window to buy shares here.

    As for the option, an expiration date of this Friday is too soon to get a great profit. Although Friday’s $52 calls are just $0.11, they’re not likely to move much higher than $0.20 at the most, unless shares can head up another 5-7 percent in the next week.

    Rather than buying the call and hoping it doesn’t bleed out at the last second, speculators should consider the June 2020 $52.50 calls. They’re pricier, but if shares are heading higher, they’ll give investors a higher probability of a profit, especially as the company next reports earnings in December.