Micron Earnings Outlook: Options Traders Position for Potential Upside

In a free-wheeling press conference on the White House lawn on Tuesday, President Trump shared the microphone with at least $15 trillion worth of AI leaders including Jensen Huang, Sundar Pichai, Greg Brockman, Dario Amodei and Elon Musk, riffing on the future of what the President calls "super intelligence," promising an economic boom surpassing any in history.

In the near term, the market needs to get through Micron earnings. The good news is options traders think it could be a slam dunk.

Market-makers are pricing a smaller 7% move for Micron Wednesday after the bell, which is slightly less than its four quarter average move of 8%.

But for a stock that hit a screeching halt just three months ago when the blow-up of hedge fund Situational Awareness sent a chill through the AI bull market, a more measured rally might be just what traders want.

Options flows in Micron leaned bullish Tuesday, with 61,000 calls likely bought versus 37,000 puts, and 75% of the total $1.6 billion of premium traded tied to calls, according to Cboe LiveVol and SpotGamma data. While call-selling was also prominent, it was mostly due to some big sellers of the 1,150-strike call in Micron, a bet the stock won't exceed its implied earnings move, rather than a bet against the company.

About an equal number of puts and call contracts were open as of the close Monday, near a one-year low for the put-to-call ratio for Micron, according to Barchart data.

"This, unlike some of Micron's prior earnings, is a more universally bullish dealer positioning," said Jason DeLorenzo, owner and founder of Volland, an options market-structure analytics platform. "They already have a lot of negative hedges that have to be unwound so I think we'll probably go up to what the straddle is pricing in."

Open interest in puts between 980 and 1000 is high enough that should Micron disappoint on earnings, owners of those protective positions would take profits and provide support to the stock, according to DeLorenzo's analysis.

Data from Opti-View, an options-trading analytics website, echo that analysis, showing 34,000 open puts at the 1,000 strike. The most popular strike for calls is at the 1,200 level.

"If 1,150 breaks, 1,300 will not be far behind," DeLorenzo said.

What could get in Micron's way?

Bond prices are selling off at the fastest rate all year, according to 14-day RSI on the iShares 20+ Year Treasury Bond ETF (TLT) , and so in turn, rates are surging. Stock indexes outside of the small-caps have been able to shrug it off, but higher rates could eventually take their toll.

"Even the AI [trade] could get rocked by the bond market," said Don Kaufman, cofounder of TheoTrade.