Micron Technology Inc.: Brexit Shapes an Opportunity in MU Stock

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If you are looking for a good trading opportunity amid this Brexit morass, Micron Technology Inc. (NASDAQ:MU) has one coming up this Thursday after the close.

The red-hot semiconductor firm is scheduled to take its turn in the earnings limelight, with Wall Street looking for a loss of nine cents per share on revenue of $2.96 billion.

EarningsWhisper.com puts the whisper number at a loss of eight cents per share.

MU Stock
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Prior to the so-called “Brexit” vote, MU stock was on a breakout run above its 200-day moving average and long-term resistance at $14. But the shares were overbought and needed to blow off some steam.

The selloff of the past two days blew off more than a little bit of steam for MU stock, sending the shares down nearly 15% to support at $12. Now nearly oversold, Micron stock is ready to make a comeback.

On the sentiment front, the analyst community is leaning bullish on MU stock. Data from Thomson/First Call reveals that 17 of the 31 analysts following MU stock rate the shares a buy or better. Additionally, the 12-month consensus price target for MU stock rests at $15 — a 22.6% premium to yesterday’s close.

In the options pits, short-term and intermediate-term traders are divided on MU stock’s prospects. For instance, Micron’s July/August put/call open interest ratio has fallen to a reading of 0.71 recently, while the weekly July 1 series put/call OI ratio has risen to a near-term high of 1.14. This spike in short-term puts is likely Brexit driven, with options traders likely overlooking the upside potential of Thursday’s earnings report.

Overall, weekly July 1 series implieds are pricing in a potential post-earnings move of about 12% for MU stock. This places the upper bound at $13.69, and the lower bound at $10.77 from Monday’s close.

2 Trades for MU Stock

Call Spread: While broad-market headwinds are certainly a concern, there is considerable potential for Thursday’s earnings to help MU stock regain some of its Brexit-induced losses.

Traders willing to take a chance on a MU rally might consider a July 15 series $13/$14 bull call spread. At last check, this spread was offered at 41 cents, or $41 per pair of contracts. Breakeven lies at $13.41, while a maximum profit of 59 cents, or $59 per pair of contracts, is possible if MU stock closes at or above $14 when July options expire.

Put Spread: Clearly, there is the potential for the Brexit situation to get worse, and Micron is not immune to the fallout.

As such, traders siding with the bears might want to consider a July $11/$12 bear put spread. At last check, this spread was offered at 22 cents, or $22 per pair of contracts. Breakeven lies at $11.78, while a maximum profit of 78 cents, or $78 per pair of contracts, is possible if MU stock closes at or below $11 when July options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/micron-technology-mu-stock-options/.

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