Unusual Options Activity: Micron Technology (MU)

Shares of semiconductor giant Micron Technology (MU) have been soaring higher in recent weeks. Traders expect the trend to continue. The April 2021 $77.50 call option just saw over 8,450 contracts trade, against a prior open interest of 196. That’s a 43-fold rise in volume.

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  • The trader is betting that shares will rally another $4 from their current price near $73.50 in the next 130 days. The trader paid about $6.75 for the options.

    Over the past few years, shares of Micron have struggled to stay over the $60 range, facing sharp pullbacks each time. This time however, shares have gapped higher, and have gone nearly parabolic in recent sessions. That includes a 14 percent rally in the past week alone.

    Action to take: While the uptrend is clearly in place, shares are looking heavily overbought in the short-term. Traders should use a down day or two to take advantage of lower prices before looking to go long shares of this technology giant.

    On a pullback, traders should look for an option a few months out, like the April strike date. But even a 5-10 percent drop in shares to get them out of overbought territory will sharply reduce the price of an option like the $77.50 one. Traders should look to buy this option only if they can pay less than $5 to do so.

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