Trade of the Day

December 21, 2016

Semiconductor stocks have surged this year, with Micron Technology MU – NASDAQ racking up gains of 45.6%.

Will this rise continue in 2017? Someone thinks so, and [yesterday] bought 7,500 MU July 22/29 bull call spreads for $1.68 apiece.

Bottarelli Research Translation: With a capital outlay of $1.26 million and a break-even price at expiration of $23.68, MU needs to increase 14.7% for this trade to pay off.

After an impressive post-election run, MU has now leveled off and a glance at the chart tells you why.

The stock is sitting at serious long-term resistance.

However, given the extended time horizon, there’s plenty of sessions for MU to break through and continue its march higher.

This trade maximizes its value at the short strike of $29 (+40.4%) wherein each spread would profit $5.32 or $3.99 million in total.

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Source: Bottarelli Research