Micron Technology, Inc. (MU), Trending Stock Report

Micron Technology, Inc (MU) is trending in news and social media this week as the company is scheduled to announce earnings on Wednesday, June 26th after the market close. Volatility expectations are high in anticipation of the earnings report and the stock recently had a Buying Climax peaking near the open last Thursday.

From an options trader’s perspective, MU options are very expensive ahead of the earnings report. Expensive options means we want to use option selling strategies.

Since January of 1999 MU has had 33 buying climaxes, but only 2 times did the stock move up big enough in percentage terms to cause our selling strategy to lose money. That means according to the Buying Climax indicator, our trade idea today has a 94% chance of success.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of MU’s stock price over the past year. You can see that the actual behavior (the blue histogram) did not make big moves as often as the modeled options prices expect. This graph tells us the MU options expiring on June 28^th are priced for an extreme move that is unlikely to match the historical performance of MU’s actual price movement.

This Volatility Cone shows us that the volatility expectations (the yellow dots) are not just above average expectations, they are all above the extreme high historical volatility. To learn more about the Volatility Cone, click here. This indicator suggests that options at every term are priced ridiculously high.

This Volatility Term Structure shows us the volatility expectations at each expiration. To learn more about Volatility Term Structure, click here. This chart shows us that the most expensive options relative to all other expirations are those that expire this Friday. That means we will focus our selling strategy on Friday’s expiration.

MU recently indicated a Buying Climax. The volatility expectations and options prices are relatively expensive compared to the way the stock has behaved in the past. The most expensive options expire this Friday, two days after the scheduled earnings report. The Buying Climax suggests it will be more difficult for the stock to make a big up move, so we will use a high probability strategy that has a bearish bias.

Be sure to read the ODDS Online Daily Trade Idea report to get the details of our trade idea using MU options today.