Bought to open MU 7/8 expiration $13 strike puts


Bought 14 contracts of MU 7/8 expiration $13 strike puts at $0.30. Total cost including commission is $438.45, or $0.31/share.


After the market close, Micron reported earnings. I opened the position 4 months ago at an average cost of $10.69/share. The stock closed today at $13.69, so selling it was definitely a consideration. And in hindsight, given the after-hours reaction to the earnings result, it might have been the right thing to do. The reason I did not sell it, was twofold: First, given the still very depressed level of the stock, I feel that there is much more upside to be had. Second, sentiment around the stock has been quite positive, lately, with several analysts raising their estimates.

recent ratings activity on MUrecent ratings activity on MU

But given the state of both the mobile handset market and the PC market, I felt that there was definitely scope for an interim hiccup, which, given the somewhat fragile market sentiment following the Brexit fiasco could lead to a short-term sell-off in the stock.

Based on all this I decided to keep the stock, but to protect the position with a long put. I had calculated the likely 1-day return following a negative earnings result to be around -9%; roughly to $12.65. This is a price area of relatively high recent volume, where I feel the stock might find support. But I picked an expiration that is one week away, in order to have more time for a short-term negative reaction to play out.

June 30, 2016 at 1:03pm · MU · buy to open · options

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