Micron Technology Inc. (MU)

Update 1/10/2017: MU gapped sharply to the upside after earnings were published and never returned to the position’s profit zone. 

Shares rose 9.5% over 20 days, or a +173% annual rate. The options position produced a 24.7% loss on debit for a -451% annual rate.

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MU publishes earnings on Wednesday after the closing bell.

I shall use the JAN series of options, which trades for the last time 30 days hence, on Jan. 20.

Implied volatility stands at 44%, which is 3.9 times the VIX, a measure of the volatility of the S&P 500 index.

MU’s IV stands in the 11th percentile of its annual range and the 59th percentile of its most recent broad movement.

The price used for analysis was $20.57.

Iron condor, short the $20 calls and long the $24 calls,

short the $20 puts and long the $16 puts,

sold for a credit and expiring Jan. 21.

Probability of expiring out-of-the-money

JAN	Strike	OTM	Δ
Calls	20	90.6%	12
Puts	20	95.9%	3

The premium is $1.86, which is 47% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

I have entered a position on MU as described above. The stock at the time of entry was priced at $20.57.

— Tim Bovee, Portland, Oregon, Dec. 21, 2016