Put Options on MU on 6/16/2015

Micron Technology, Inc. (MU) provides semiconductor solutions worldwide.

The company manufactures and markets dynamic random access memory (DRAM), NAND flash, and NOR flash memory products; and packaging solutions and semiconductor systems.  It operates in four segments: Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit. Shares are currently trading near their low of the year on concerns over DRAM prices. 

A number of anaylsts have been bearish on the stock. 

Morgan Stanley analyst Joseph Moore downgraded Micron to Underweight, the firm's equivalent of a "sell" rating, from Equal Weight. Moore said that his checks in Taiwan indicate that the outlook for DRAM, a form of flash memory sold by Micron, is "cautious versus expectations" for the third quarter. Previously, the analyst had expected DRAM to experience a seasonal boost in Q3, but he now expects this lift to be delayed until at least Q4. Moreover, DRAM prices will probably stay weak through Q3 as customers' inventories of DRAM are excessive, while sales of PC DRAM will probably remain weak in Q3 and could stay low in Q4, the analyst stated. Moore is concerned that DRAM supply could exceed expectations in 2016, while demand for the product could decelerate next year. Micron could have difficulty improving its earnings in 2016 from current levels, warned the analyst, who set a $21 price target on the shares.

On June 9, after conducting checks in Taiwan, research firm Piper Jaffray predicted that PC DRAM prices would continue to decline. However, the firm kept an Overweight rating on Micron, citing its belief that the stock's valuation was "compelling."

Much more pessimistic was research firm Drexel Hamilton, which on June 9 cut its rating on Micron to Sell from Hold, DRAM price declines are likely to continue to decline, the firm predicted.

This is how we are going to trade this: We will buy MU July 17th $25 Put options.

52-Weeks Trading Range: $23.70 to $36.59

Last Trade: $24.03

Trade Buy 1 July $25.00 Put at $1.60 For a net debit of $1.60 Profit/Loss Analysis Breakeven at $23.40 Maximum profit is unbounded Maximum loss is ($160.00) at strike of $25.00 Closing Summary Sold 1 July $25.00 Put at $5.95

Position closed on 6/26/2015 at price of $5.95 with a 271.88% gain in 10 days.

Updates

6/26/2015 12:06:22 PM

We are taking profits on MU July $25 put at $5.95

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