Someone thinks Micron Technology is going nowhere in a hurry.
optionMONSTER's tracking programs show that 13,000 April 15 puts were sold for $1.97 yesterday, along with an equal number of April 16 calls for $2.08. Volume was more than 18 times open interest at both.
Known as a short strangle , the trade generated a credit of $4.05. That will be their maximum profit if the memory-chip maker closes between $15 and $16 on expiration. Gains will erode outside of that range, turning to losses under $10.95 or above $20.05. (See our Education section for more on market-neutral strategies that make money from the passage of time rather than a directional move.)
MU fell 2.16 percent to $15.41 yesterday. It's lost more than half its value this year following a 350 percent rally in 2013 and 2014.
Chart watchers probably expect there to be support around $11.60, where it peaked in 2010 and 2011. They may also think that it will stay under $20 because that's the bottom of a bearish gap in June following a poor earnings report. Those technical considerations would help explain their choice of a selling a strangle.
Total option volume was 4 times greater than average in the session.
More From optionMONSTER