Our Micron Technology (MU) put expired worthless on Friday. I said at the time that I would hold off on selling another put to reduce our net debit on the position until after the company announced earnings this week.
Micron reported revenue increased 37% year over year to $8.27 billion for its fiscal fourth quarter, coming in slightly ahead of analysts’ consensus estimate. Adjusted earnings were $2.42 per share, well above expectations for $2.33 a share.
However, the stock sold off after the company’s forecast disappointed the Street. Management said memory-chip shipments are set to fall in the near term as PC makers face shortages of other parts. Micron expects revenue of about $7.65 billion for the current quarter, below the average analyst estimate of $8.57 billion.
We can take advantage of the post-earnings volatility by selling a put. The income we generate will reduce our net debit on the ongoing position. However, you can sell a put today even if you were not in the previous position. Just be aware that we will be tracking and managing the trade based on the ongoing position.
Current Stock Price: $71.57
Net Debit: $7.27
Action: Sell to open the MU Oct Week Two (10/8) 71 Put
Current Option Price: $1.32-$1.34
Recommended Limit: Set your initial limit order at $1.33, but adjust as needed to sell a put today
New Net Debit: $5.94
Expiration: After the close on Friday, Oct. 8
Potential Rate of Return: I am targeting breakeven for this position