Unusual Options Activity: Micron Technology (MU)

Shares of semiconductor company Micron Technology (MU) have been caught up in the recent tech selloff. One trader sees the potential for a bounce higher in the near future.

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  • That’s based on the August $82.50 calls. Over 12,730 contracts traded, a 35-fold rise in volume from the prior open interest of 360 contracts. The buyer of the option paid $6.25 to make the trade, which expires in 100 days.

    With shares of Micron selling off to around $80, the option will move in-the-money if shares move about 3 percent higher. Given the stock’s daily volatility, that’s a likely move at some point in the coming weeks.

    Even with the recent drop in shares, Micron is up 78 percent in the past year. Sporting 30 percent revenue growth and 49 percent earnings growth, it’s likely shares can continue to trend higher.

    Action to take: Tech companies have been getting hit hard in recent weeks, starting with smaller tech names and now hitting bigger tech names. An oversold bounce is likely well before this option expires, making it a reasonable buy now.

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  • Traders should look to book mid-double-digit profits in the coming weeks. Chances are a short-term bounce will allow traders to exit the trade well before the time premium starts to work against the premium in the option, which can tend to turn a paper profit into a real loss.


    Disclosure: The author of this article has a position in the stock mentioned here, but does not intend to make any further trades in this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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