Series Of Large Options Trades Suggests More Volatility For Micron

Micron Technology, Inc. MU shares traded higher by 3.6% on Wednesday and are up more than 33% year to date. A series of unusually large options trades Wednesday morning suggests the memory giant still has traders' attention.

The Trades

On Wednesday morning, Benzinga Pro subscribers were alerted to a series of unusually large Micron option trades. All together, the 13 Micron options trades represented a net bearish bet of more than $500,000 on Micron.

At around 9:39 a.m., a trader sold 516 Micron put options at a $44 strike price that expire July 26. The puts were sold at the bid price of $2.079 and represent a $107,276 bullish bet on Micron.

Within 10 minutes, a trader sold 906 Micron call options at a $43.50 strike price that expire on Friday. The calls were sold at the bid price of 87 cents and represent a $78,882 bearish bet on Micron.

At around 10:16 a.m., a trader bought 2,000 Micron put options at a $43.50 strike price that expire on Friday. The puts were purchased at the ask price of 74 cents and represent a $148,000 bearish bet on Micron.

At 10:47 a.m., a pair of Micron put buys were executed within a few seconds of each other. Together, the trader purchased 2,072 Micron put options expiring on Aug. 2 at the strike price of $42. The trader paid the ask price of between $1.15 and $1.155. The trades represented a bearish bet of more than $238,000 that Micron’s share price will be below $40.85 within a month’s time.

At around 11:01 a.m., a trader bought 900 Micron call options at a $45 strike price that expire on July 26. The calls were purchased at the ask price of 69 cents and represent a $62,100 bullish bet at a break-even price of $45.69.

Less than a minute later, potentially the same trader bought 501 Micron put options at a $42 strike price that expire on Aug. 9. The puts were purchased at the ask price of $1.29 and represent a $64,629 bearish bet.

At 11:14 a.m., another pair of Micron put buys were executed within a few seconds of each other. Together, the trader purchased 1,000 Micron put options expiring on Sept. 20 at the strike price of $44. The trader paid the ask price of $3.201. The trades represented a bearish bet of $320,100 that Micron’s share price will be below $40.80 in roughly two month’s time.

Less than a minute later, likely the same trader sold 500 of the same Sept. 20 $44 put options at the bid price of $3.201, potentially breaking even on the trade and reducing the net bearish bet to just $160,050 in size.

At 11:19 a.m. a trader sold 1,057 Micron call options at a $49 strike price that expire on Sept. 20. The calls were sold at the bid price of 95.1 cents and represent a $100,520 bearish bet.

Less than a minute later, likely the same trader bought 782 of the same Sept. 20 $49 call options at the ask price of 96.1 cents. The trader seemed to reestablish a large portion of his earlier position, buying back in at a 1% premium to the earlier sale price. The net bearish bet was reduced to just $26,152.

Finally, at 12:28 p.m., a trader bought 1,000 Micron put options at a $41 strike price that expire on Aug. 9. The puts were purchased at the ask price of $1.057 and represent a $105,700 bearish bet.

Options Insight

Even traders who focus exclusively on the stock market watch the options market closely to gain insight into what option traders may be thinking.

Due to the relative complexity of the options market, options traders are generally seen as more sophisticated than the typical stock trader. Large options traders are often institutions or wealthy individuals that may have a unique perspective and/or advance information on a given stock.

Another Memory Upcycle In Doubt?

The mostly bearish trading action in Micron on Wednesday suggests some traders are skeptical that 2019 will be the next 2016 for Micron. From June 2016 to June 2018, Micron shares gained more than 600% during a boom period in the memory market, a Seeking Alpha contributor recently noted.

However, management has guided for a 50% decline in earnings next quarter, DRAM spot prices are showing no signs of bottoming and downcycles in the memory market tend to last at least six quarters, longer than the current four-quarter downturn.

The mixed trading and repositioning in Micron options on Wednesday suggests traders don’t quite know what to make of Micron’s big 2019 rally and near-term outlook. Given the large number of positions being maintained and established, it would be reasonable to expect some volatility in Micron stock in the coming months.

Unfortunately, there’s no way to be 100% certain whether option trades represent standalone positions or hedges against larger stock holdings. Given the none of Wednesday’s trades represented more than $200,000 in value, they are unlikely to be institutional hedges in this instance.

Micron traded around $42.84 per share at time of publication.

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Photo credit: Mike Deal, Flickr