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Intel (INTC) earnings with Micron (MU) call buyers?
3 min read

Intel (INTC) earnings with Micron (MU) call buyers?

Intel (INTC) earnings with Micron (MU) call buyers?

  • Intel Corp (INTC) reports today at ~4pm ET
  • Large call buys in Micron (MU), expiring tomorrow.
  • MU does not report until June.

Overview

Intel (INTC) is set to report after the close. (Consensus expectations of $1.28 per share on revenue of $18.75 billion). In the semiconductor space there's some interesting call volume in Micron (MU).

Unusual Options Activity

INTC has seen some typical pre earnings options volume, but something else sticks out in today's option volume. Apple calls and puts are some of today's most active lines but amidst that is very large volume in Micron 45 calls, expiring tomorrow. From Barchart:

It's impossible to know what's going on with the MU volume but chip stocks do tend to move on each others events, especially with INTC. The fact that the MU calls expire tomorrow likely means some proxy trading on INTC's ability to move the entire semiconductor sector.

The Set-Up

The SMH semiconductor etf gives us an overview of the sector. It was above $150 in February, reached a low near $100 in March and has bounced back to $131 today. INTC is the second largest holding, MU is the 9th. Other top holdings include the usual suspects like NVDA, AMD etc.

Let's zoom in on Micron (MU)

2 month expected move from OptionsAI technology for MU:

Those 45 calls expiring tomorrow are currently ~$.50, meaning a breakeven of $45.50 in the stock. That's about a 30% probability of breakeven as assigned by the options market:

Alternatives

Using that 30% probability of breakeven we can look out in time for less binary trade ideas. For instance, if one was looking from a breakout in MU on the heels of a good report from INTC (a lot of ifs) a price target that gives it a more time to play out can produce similar break evens but with higher probability. From OptionsAI technology, a May 1st expiration price target of $47 produces these multi-leg spreads with higher probability of profit:

In the case of the (bullish) long call spread the breakeven is exactly the same but with an additional week of time. In the case of the (bullish) short put spread it is risking more to make less, but with only needing MU to not go lower, a bet against the bears.

Options are all about probability, and time is one of the main factors. When people look at single leg options near term it's usually because they want them to be dollar cheap, but multi-leg spreads can lay off some of the time value in cost, while increasing probability. Of course any bullish trade will be a loser if INTC drags the sector down in such a short time frame, even with the extra week.

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