Micron's 51% Rally This Month Spurs Demand for Put Options: Options Chatter

$Micron Technology (MU.US)$ attracted the biggest block trade in options so far Wednesday as investors and speculators buy contracts that can help protect their gains after the stock's 50% jump this month.

In the first 10 minutes of trading, an active buyer paid a $42.22 million premium for put options that give their holder the right to sell 981,900 Micron shares in the next 106 days at $390 each. That strike price is $40 below the current stock price.

(To see Micron's options chain, click here. For the unusual options activities, click here.)

(ICYMI, read Silver’s 6.5% Slump Boosts Put Options' Appeal as Insurance: Options Chatter)

The Micron trade was posted just as the stock extended its record-breaking rally, buoyed by concerns that President Donald Trump's latest threat to impose tariffs on South Korean imports could aggravate the shortages in memory that have bolstered demand for Micron's chips and strengthened the American company's pricing power.

Amid the bullish tailwind that has propelled the stock's 388% climb over the past year, 13 of the 15 most commonly used technical indicators on the moomoo app are flashing warning signals that Micron could now be overbought and the share price may soon turn lower.

That risk has bolstered the appeal of put options that can shield investors in case of a reversal of the uptrend, while giving sellers the opportunity to collect premiums if the stock continues to march higher. The open interest, or the tally of outstanding put options stood at 1.05 million contracts, surpassing call option's 818,888 contracts, exchange data showed.

While the rally has sent the stock price trading at 40.5X earnings, that multiple would drop to 13X if based on profit for the fiscal year ending in August, as analysts forecast revenue doubling to $75 billion in those 12 months.

Supplier $ASML Holding (ASML.US)$'s strong bookings provided another tailwind for Micron, helping send the stock 5.8% higher. The Dutch semiconductor manufacturing equipment maker said Wednesday bookings climbed to 13.16 billion euros in the fourth quarter, from 5.40 billion euros in the previous three months.

Share your thoughts on Micron in the comments section. Is the stock near its peak or are you seeing more upside potential? Let your voice be heard by voting below. And if you want to read more options columns like this one on silver, or this one on Apple, 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, including Meta's coming up later today.

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.

123K Views