The Arena
The market had an impressive week to shake off some very negative political and economic headwinds. Consumers seem set to continue ahead normally and the thought of a recession has already started to fade, at least for now. As we know, in the world today, things can change fast. The impact of the Russia and Ukraine fight isn’t impacting the market or the world as much as everyone thought it might. It seems most countries are content staying out of that situation and letting the two sides come to their own agreement about how to peacefully move forward. I guess we shall see.
With regard to Micron Technologies, the tech sector has been out behind the wood shed for several months getting beat. I believed many companies had passed on from the trauma but this week we witnessed meaningful signs of life for the first time in weeks. For now, all we can do is wait to see if another trend lower will emerge or if investors are once again optimistic about tech companies.
The Coach
Micron Technologies (MU) is showing signs of elevated implied volatility in its current state. Thus, making it an attractive option for selling some short premium. Admittedly, selling into an earnings event doesn’t exactly settle well given the propensity for larger moves. However, volatility is capable of rising again on Monday and that would make selling an iron condor potentially even more attractive. That said, if you’re able to determine a direction then a bull put spread or a bear call spread could become an equally attractive offer. Will this earnings play result in a price move greater than 20% in either direction?
To continue, here are all the details, directly from Micron, about what we’ll see this week. Will the share price collapse, stretch its wings, or simply continue its current course?
The Attack
If the chart above and MU earnings are believed to be favorable then a bullish play here could make sense. Conversely, if we believe the tech sector as a whole will remain bearish for the foreseeable future then taking a bearish position may be the correct assumption. Lastly, should MU report favorably and the tech sector remain week then the case for an iron condor into earnings could take advantage of heightened volatility and the resulting collapse just after. Only time will tell which move pays.
Bullish assumption
| Buy To Open | Sell To Open | Entry Order | Total Risk | Prob. of 50% Profit |
| 20 MAY 22 60 Put | 20 MAY 22 62.5 Put | $40.00 | $210.00 | 92% |
Neutral assumption
| Buy To Open | Sell To Open | Entry Order | Total Risk | Prob. of 50% Profit |
| 17 JUN 22 57.5 Put | 17 JUN 22 60 Put | $80.00 | $170.00 | 83% |
| 17 JUN 22 97.5 Call | 17 JUN 22 95 Call |
Bearish assumption
| Buy To Open | Sell To Open | Entry Order | Total Risk | Prob. of 50% Profit |
| 20 MAY 22 95 Call | 20 MAY 22 92.5 Call | $40.00 | $210.00 | 88% |
God Bless,
Jeff
