Micron Technology (MU) – Trade Idea

Company Description

Micron Technology, Inc. is engaged in semiconductor systems. The Company’s portfolio of memory technologies, including dynamic random-access memory (DRAM), negative-AND (NAND) Flash and NOR Flash are the basis for solid-state drives, modules, multi-chip packages and other system solutions. Its business segments include Compute and Networking Business Unit (CNBU), which includes memory products sold into compute, networking, graphics and cloud server markets; Mobile Business Unit (MBU), which includes memory products sold into smartphone, tablet and other mobile-device markets; Storage Business Unit (SBU), which includes memory products sold into enterprise, client, cloud and removable storage markets, and SBU also includes products sold to Intel through its Intel/Micron Flash Technology (IMFT) joint venture, and Embedded Business Unit (EBU), which includes memory products sold into automotive, industrial, connected home and consumer electronics markets. Source: Reuters

Charts

Option Pricing

  • Implied Volatility (expected price movement) for short-dated options is 41%
  • Realized Volatility (historic price movement) for short-dated options is 48%
  • Implied Volatility Percentile for short-dated options is 13%

Trade Idea

MU incurred a 14% drawdown from its 1Y high ($51.39), which was realized on 9/11/19. In recent sessions, the stock has found support at previous swing lows. Tactical traders may be looking to buy the name at the lower end of its 3-month trading range. Strong 2-day price action may lead traders to believe that a reversal is likely to occur as the equity appears to be oversold. Short-dated options appear to be cheap with the IVP sitting in the 13 %-ile. As a result, one might want to consider the following trade structure if bullishly disposed: 

SideQtyExpStrikeType
Buy115 Nov45Call

Break-even on expiration:

  • Losses of up to $1.90 between 45 and 46.90 with max loss of $1.90 below 45
  • Up to unlimited profits if share price goes to infinity. We haven’t seen that happen yet 🙂 

Rationale:

  • This trade idea risks 4% of the stock price with a break-even up ~7%

PnL Graph

This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of EQT Media, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation. Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors. This communication may not be redistributed or retransmitted, in whole or in part, or in any form or manner, without the express written consent of EQT Option. Any unauthorized use or disclosure is prohibited. Receipt and review of this information constitutes your agreement not to redistribute or retransmit the contents and information contained in this communication without first obtaining express permission from an authorized officer of EQT Option.