Semiconductor producer Micron Technologies (MU) have had a strong year, rallying 42 percent. One trader sees further upside in the coming months.
That’s based on the May $100 calls. With 93 days until expiration, 14,221 contracts traded compared to a prior open interest of 354, for a 40-fold rise in volume on the trade. The buyer of the calls paid $2.19 to make the bullish bet.
Micron shares recently traded for about $85, so shares would need to rise $15, or over 17 percent, for the option to move in-the-money. It would also mean shares breaking to a new 52-week high over $90.04.
While semiconductor stocks are the market darling right now, the space is still gearing up to meet demand for chips that can operate AI-powered programming.
Micron has lost money over the past year as part of that process, even as revenues have increased by 16 percent.
Action to take: While the company hasn’t turned around yet, shares are in an uptrend in anticipation of that move occurring.
Investors may want to look for down days to buy shares with an eye for market-beating returns over the next few years. Micron also pays a 0.6 percent dividend.
Traders can likely see mid-double-digit returns or better from the May $100 calls in the coming weeks or months. Trades who buy multiple contracts may want to buy a partial position and use down days in shares to add to that stake.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.