Semiconductor company
Micron Technology (MU) has seen shares rally 40 percent from their December lows, and are on track to erase the last 10 percent drop they’ve seen over the past year. One trader is betting on such a continued move higher.
That’s based on the August $72.50 calls. With 74 days until expiration, 8,564 contracts traded compared to a prior open interest of 184, for a 47-fold rise in volume on the trade. The buyer of the calls paid $3.95.
Shares recently went for about $69 per share, so the option is just slightly out-of-the-money. Shares have a 52-week high of $75.41. Although that was nearly a year ago, the stock looks on track to retest that price.
Micron has been hit by the slowdown in the semiconductor space over the past year. The company has lost money in recent quarters, and revenues have dropped by 52 percent.
However, improving trends and robust demand for semiconductors have helped fuel a rally in shares so far this year.
Action to take: Investors may like shares at current prices under $70. Micron does pay a slight dividend of 0.7 percent, but it hasn’t grown recently.
For traders, the August calls could see high double-digit gains if the current rally in shares continues in the coming months. Traders may want to take some profits going into the end of June, when Micron is set to report earnings next.
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 of the companies mentioned in this article.