Micron Options Traders Lean Bullish Ahead of Earnings as Bond Market Poses Risk
Micron reports after the bell Wednesday, with options traders pricing a 7% move and leaning bullish. Bond-market weakness and rising rates remain a risk to the AI trade.
Options flows in Micron leaned bullish Tuesday. According to Cboe LiveVol and SpotGamma data cited by CNBC, 61,000 calls were likely bought versus 37,000 puts, and 75% of the total $1.6 billion of premium traded was tied to calls. Call-selling was also prominent, but it was mostly due to some big sellers of the 1,150-strike call in Micron, a bet the stock will not exceed its implied earnings move rather than a bet against the company.
About an equal number of puts and call contracts were open as of the close Monday, near a one-year low for Micron's put-to-call ratio, according to Barchart data cited in the report. Jason DeLorenzo, owner and founder of options market-structure analytics platform Volland, said, 'This, unlike some of Micron's prior earnings, is a more universally bullish dealer positioning.' He added that dealers already have a lot of negative hedges that have to be unwound, so he thinks the stock will probably go up to what the straddle is pricing in.
Open interest in puts between 980 and 1000 is high enough that if Micron disappoints on earnings, owners of those protective positions would take profits and provide support to the stock, according to DeLorenzo's analysis. Data from Opti-View, an options-trading analytics website, showed 34,000 open puts at the 1,000 strike. The most popular strike for calls is at the 1,200 level. DeLorenzo said, 'If 1,150 breaks, 1,300 will not be far behind.'
The report also pointed to risks. Bond prices are selling off at the fastest rate all year, according to the 14-day RSI on the iShares 20+ Year Treasury Bond ETF (TLT), and rates are surging in turn. Stock indexes outside of small-caps have been able to shrug it off, but higher rates could eventually take their toll. Don Kaufman, cofounder of TheoTrade, said, 'Even the AI [trade] could get rocked by the bond market.'
The earnings report arrives after a White House lawn press conference Tuesday in which President Trump shared the microphone with AI leaders, including Jensen Huang, Sundar Pichai, Greg Brockman, Dario Amodei and Elon Musk. The discussion covered the future of what Trump calls 'super intelligence,' with a promise of an economic boom surpassing any in history, according to CNBC. In the near term, the market needs to get through Micron earnings.