MU Analysis

Micron Technology Inc. (MU)

Update Oct. 1, 2018: I exited MU for a $0.52 profit on the options, with shares at exit priced a $46.29, two cents below the entry price. The exit was well within the profit zone, $2.29 above the short put strike price.

Implied volatility was 42% when I exited, 14 points below its entry level.

I exited at 51.5% of maximum potential profit, close to my target of 50% of max.

Shares declined by 0.04% over 12 days, or a -1.3% annual rate. The optoins position produced a +106.1% return for a +3,228% annual rate.

I have entered a short iron condor non-directional spread on MU, using options that trade for the last time 29 days hence, on Oct. 19. The premium is a $1.01 credit and the stock at the time of entry was priced at $46.31.

I made the decision to enter the trade in my account based on high implied volatility just prior to an earnings announcement. MU publishes earnings on Sept. 20 after the closing bell.

The profit zone for this position is between $58.51 on the upside and $42.01 on the downside.

Implied volatility stands at 56%, which is 4.8 times the VIX, a measure of the volatility of the S&P 500 index. MU’s IV rank stands at 69%.

The price used for analysis was $46.61.

Premium: $1.01 Expire OTM
MU-iron condor Strike Odds Delta
Long 60.00 93.9% 9
Break-even 58.51 74.7% 24
Short 57.50 91.0% 12
Short 44.00 93.9% 8
Break-even 42.01 74.0% 23
Long 41.00 76.8% 19

The premium is 37% of the width of the position’s wings.

The risk/reward ratio is 2:1, or $1.99 per share in potential loss against $1.01 per share in potential gain.

The bid/ask spread was 3.9%.

By Tim Bovee, Portland, Oregon, Sept. 20, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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