Micron's 240% Surge in Past Year Bolsters Case for Buying Puts to Protect Gains: Options Chatter
$Micron Technology (MU.US)$'s 240% share price surge in the past year is bolstering the appeal of put options that can shield holders from a potential reversal of the memory giant's record-breaking rally.
In the first half hour of trading Friday, an active buyer paid a $21 million premium for put options that give their holder the right to sell Micron shares at $330 by March 20. That strike price is about $36 below the intraday all-time high of $365.81 reached earlier in the day.
While supply of memory chips made by companies including Micron has tightened due to surging demand for use in artificial intelligence workloads, there's no shortage of arguments supporting the share price rally. On Thursday, a filing with the Securities and Exchange Commission showed that Director Teyin Mark Liu, who served 30 years in leadership roles at $Taiwan Semiconductor (TSM.US)$ before joining Micron's board in March, bought 23,200 shares of the memory giant earlier this week. That helped bolster investor confidence in the stock.
Despite the bullish arguments, a 53% surge over the past month has helped trigger warning signs from technical indicators. Ten of the 15 most commonly used technical indicators are signaling that Micron shares may have risen too far too fast and they could now be viewed as oversold and the trend may soon turn bearish.
That potential shift is bolstering the case for buying put options. By 2:29 p.m. in New York Friday, more than 354,000 put options have changed hands, more than double the previous day's volume and the 20-day average of 156,880 contracts.
The $21 million block trade of $330 put options expiring in 62 days is already more than quadruple the open interest.
Including call options that give their holder the right to buy Micron shares at a predetermined strike price, total volume reached 755,880 options, landing the stock in sixth place for the most active stock options, behind $Tesla (TSLA.US)$, $Wolfspeed (WOLF.US)$, $NVIDIA (NVDA.US)$, $Palantir (PLTR.US)$ and $Apple (AAPL.US)$.
(To see options ranking that's typically led by Tesla and Nvidia, click here.)
(To see options ranking that's typically led by Tesla and Nvidia, click here.)
Share your thoughts on Micron and the rest of the semiconductor stocks. Which one do you think will outperform this year? Let your voice be heard by voting below. And if you want to read more options columns like this one on AMD, or this one on TSMC, follow me here, where you can also find my column that tracks short sellers' trading volume and the earnings stories on some of the biggest stocks.
Disclaimer: Options trading entails significant risk and is not appropriate for all customers. It is important that investors read the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Opening new options positions close to or on their expiration date comes with substantial risk of losses for reasons that include potential volatility of the underlying security and limited time to expiration. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period. Certain complex option strategies carry additional risk, including potential losses that may exceed the original investment amount. If applicable, supporting documentation for any claims will be furnished upon request.
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Luzi Ann Santos
Moomoo Senior News and Community Manager
Former editor at Bloomberg, ex-commentary editor at Lazard. Posts aren’t investment advice. Views are just mine.
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bullhorns777 : try and go against the rise
bullhorns777 : its 240% rise is a reason for you to buy. the company is essential to everything AI
bullhorns777 : get in now with shares/call options or be left behind
いしいかれん : ...
NVDAvsTSLA bullhorns777 : It's just a normal operation to protect existing gains, without going against the trend.
Slay2dudes : ok
75658397 : Storage is a rigid demand
VGinvestor : Technical indicators don't mean much when the fundamentals are rock solid. The reason it was rising so much so quickly was because it was so much undervalued. In fact it still is severely undervalued, so it for sure will continue to rise quickly until it is fairly valued. Those who short it or buy puts will be burned badly.
MDJView VGinvestor : yes bad idea jeans idea … and being wrong right now could be very costly. if the move up bugs you don’t play the stock either way. I get it’s a hedge but not one I would make 62 days out with a missile.
Xigeru : Well, starting from Tuesday, we’ll see if this person’s logic holds up! Did you see the news about the 15 trillion yen factory construction site in NY? Are they planning to build a power plant or something? Before the news broke about Taiwan’s second-hand property purchases, did Mr. Ryu really pay 1.1 billion yen in cash for that factory without knowing? As an outside director with an annual salary of around 30 million yen, it's pretty gutsy to casually spend such a huge portion of retirement funds like that.