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Micron's Options Activity Taking Off

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Every now and again, the investing stars align between a stock's valuation and an extra catalyst or "kicker" to get the stock moving.  And many of these times, the options market will provide a glimpse as to the magnitude of that move and sometimes, the timing.

Micron Technology (MU - Free Report) may very well be that case.  Micron Technology, a Zacks Rank #1 (Strong Buy), is presenting this week on 2/15 at the Goldman Sachs Technology and Internet Conference and again on 2/27 at the Morgan Stanley TMT Conference.  Micron has made a nice move over the last several trading days after trading $37.52 on 2/9, near its 200 day moving average of $36.37

Option buyers have stepped in very heavily in the 2/16 45 calls expiring this week, also buying 6k of the 2/23 45 calls today and additionally, 33k of the 4/20 calls were bought yesterday.  A few things to remember with each of these call trades: the first one only captures the Goldman Sachs event but is the cheapest dollar play, the 2/23 purchase gets you the first conference but not the Morgan Stanley one although it does give the investor a bit more time for the stock to break through 45 decisively and finally, the 4/20 call trade gets you both conferences AND the 3/22 earnings announcement.  

There is some precedent for owning the stock in front of and through these conferences  Last year, from the day before the initial conference through the day after the second conference, the stock had a nice 6.5% move higher and held through earnings, an investor would have enjoyed a 15.5% gain.  And like last year, earnings are approximately 3 weeks after the first conference this year on 2/15.  

The 2/23 45 calls expiring next week seem to be the better option to buy, trading currently around .52 cents.  Going further out in time beyond 2/23 without extending far enough to capture earnings is most likely not prudent. The likelihood that Micron says something dramatically different during the second conference versus the first conference is a low probability event.  

One other important event to note today is the announcement by DRAMexchange that DRAM industry wide revenues might jump 30% YOY to $96b in calendar year 2018. Why is that important you might ask?  It is because it has positive ramifications for Micron with respect to their product mix and the possibility of 2nd half price increases.    

Putting all this together, along with the fact that Micron is a Zacks Rank #1 stock, should warrant an even closer investing look at Micron.  Buying the stock or the calls here might be a nice way to cash in some chips down the road in Micron.

The author of this article personally owns MU.
 

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