Wednesday, February 29, 2012

Micron Technology (MU) - Bullish Bet Not Earnings Related... Or is it?

MU is trading $8.75, down 1.5% with IV30™ up 2.8%. The LIVEVOL® Pro Summary is below.


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Micron Technology, Inc. is a manufacturer and marketer of semiconductor devices, principally dynamic random access memory (DRAM), Nandi Flash memory (NAND Flash and NOR Flash memory, as well as other innovative memory technologies, packaging solutions and semiconductor systems for use in leading-edge computing, consumer, networking, embedded and mobile products.

This is an order flow note -- namely bullish order flow in size. The company has traded over 163,000 contracts on total daily average option volume of just 27,854. The largest trade was:
"MU - bot 50k apr 11 calls paid .14 - bot 50k mar 10 calls paid .09 - sold 13500 apr 9 puts @ .81 - sold 2.4 million shares @ 8.75 ... crossed philly"

In English, someone bought 50,000 Apr 11 / Mar 10 call stupids for $0.23 and sold 13,500 Apr 9 puts @ $0.81 to fund it. The required hedge to get the trade off was just 2.4 million shares. The options "only" cost $56,500 in a debit. The delta of the options trade was:

50000*100*.1544 + 50000*100*.1546 + 13500*100*.5309 = 2.3 million. So with stock, the trade is essentially delta neutch. But, in reality, the calls represent the right to purchase 10 million shares against 2.4 million short.

The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls and puts are mostly opening (compare OI to trade size).

The Skew Tab snap (below) illustrates the vols by strike by month.

The skew looks normal. Though it's unannounced (as far as I can tell), the next earnings release for MU should be in late Mar (but after Mar expiry). In other words, this bet is not a trade on the announced earnings.    Or is it?... Mor on that soon... Tricky...

Finally, the Charts Tab (one year) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

The stock price has that interesting parabola shape. Lest we forget the tragic passing of the CEO Steve Appleton on 2-3-2012. This will be an interesting one to watch ahead of earnings. Perhaps a pre-announcement is due given the abrupt change of CEO (and Chairman) in which case, this oddly is in fact an earnings bet.

This is trade analysis, not a recommendation.

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  1. I'll take in consideration, is still useful information on the trading web.

  2. Was there a follow up to this analysis? I'm curious to know how the trade panned out on those earnings.