By David Russell
Micron Technology (MU) reports earnings after the bell tomorrow, and one investor is betting on a rally.
optionMONSTER's tracking programs detected the sale of 10,000 January 9 puts for $0.41 and the purchase of 10,000 January 10 calls for $0.29, producing a net credit of $0.12. The trade appeared after the stock climbed to a new 52-week high Monday.
MU rose 5.58% to $9.27 in afternoon trading and is up 27% in the last month. The chipmaker peaked at $9.13 in October and corrected sharply before continuing its march higher. Today's move above $9 appears to represent a break above a resistance level that's held the stock in check for about two years.
The option trade, known as a bullish risk-reversal or a synthetic-stock position, is designed to leverage a rally. Because the transaction generated a credit, it will earn unlimited profits on a move above $10 and lose money below $9.
Tomorrow's earnings release comes after MU reported better-than-expected results on Sept. 28 and forecast a strong fourth quarter. In addition, the company is scheduled to participate in the 12th Annual Needham Growth Stock Conference at 8 a.m. ET on Jan. 12.
Other investors bought the April 10 calls, driving volume in the strike to 9,321 contracts against open interest of 4,305. Most of the large trades priced for $0.80.
Overall options volume in MU is almost triple the average level, with calls accounting for about three-quarters of the activity.
(Chart courtesy of tradeMONSTER)
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