Options Trading News

May 1, 2013  Wed 12:21 PM CT

Micron Technology is consolidating after a nice move, and the bulls are back for more.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 32,000 October 12 calls in a single block for $0.34. Volume exceeded open interest of 26,290 contracts, indicating that a new position was initiated. Barely a minute later, 10,600 October 9 puts were sold for $0.99 and an equal number of October 7 puts were bought for $0.35.

Given their closeness in time and similar expirations, it is likely that the trades were part of a single bullish strategy. Selling the put spread generated income to help finance a bullish upside bet in the calls, lowering their cost to about $0.13 per contract. The investor now stands to benefit from massive leverage on a push higher with hedged downside exposure. (See our Education section)

MU is down 2.6 percent to $9.18 in afternoon trading but is up 45 percent so far this year. The maker of memory chips reported better-than-expected revenue in March and said that demand was improving. Shares have been consolidating since, making incrementally higher lows above their 2012 peaks, which could be leading some chart watchers to believe that Micro is poised for further gains.

Even if the today's two transactions were done by different investors, both reflect positive sentiment toward the stock. The activity pushed total option volume to more than triple the daily average so far in the session, according to the Heat Seeker.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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