This Week's Best Chip Stock Trade: Micron Technology

Markets have continued to grind upward despite the short-lived Israel-Iran war, the Fed’s pause on interest rate cuts and what feels like seemingly bearish headlines every day.

With stocks determined to keep climbing, albeit slowly, I looked for a company that will have strength going forward, and landed on semiconductor giant Micron Technology Inc. MU.

With the chip and AI rally showing no signs of slowing down, Micron seems set to benefit. At the same time, the stock has not been rising as astronomically fast as some other chip competitors, at least not yet.

That’s a very good thing for the trade I have in mind today.

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Here’s a simple trade to help boost your returns on Micron.

The trade I have in mind is a leap covered call. A leap is an options position that expires well into the future, usually after one year or more. For us today, we’ll be using options that expire in June 2026.

A covered call, meanwhile, involves owning the underlying stock (Micron, in this case) while at the same time selling calls on that stock to collect premiums.

The selling of the call option well into the future allows the trader to hold the stock at a discount and if the stock continues to rise, the call option can be covered and a new option opened against the stock (commonly called rolling the strike) to continue to both hold the stock and collect more revenue as time moves forward and the stock continues to climb.

If the stock fades, we have a solid cushion of profit the short call provides. 

As I’m writing this, Micron’s relative resistance zone is around $157, while support sits near $95. Because of that, here’s how I’m structuring this Micron covered call:

• Buy 100 shares of MU – price at this writing is $127.25 per share
• Sell to Open 1 MU 18 Jun 2026 130 calls – currently priced at $24.50 

The breakeven prices of the stock at expiration on this trade is calculated by subtracting the credit received against the cost of the stock = $12,725 – $2,450 =$10,275, less commissions. This implies the actual cost of each share would be reduced to $102.75, a 20% discount. 

The possible ways to leave the trade are:

1. Hold the stock and the option until expiration of June, 2026. If the price of the stock is above $130, the trader will relinquish the stock at $130 collecting the difference between the actual cost of the shares ($102.75 and the $130 strike price = $130 -$102.75 = $27.25 less commissions or 26 % return). 
2. Set an alert for $102.75 – the breakeven price. Sell the entire position if your risk thresholds are breached. 

A trader who is bullish on Micron might say that you should sell the calls much further out of the money – that is, with a much higher strike price. That’s true, but if the market has any significant retracements, selling the strike at the money provides a tidy cushion of support while still buying the stock for potential upside.

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