Micron (MU) recently announced they are getting out of the consumer memory business and will focus on AI/Data center memory products. When you have a nice performing business but shut it down to focus on the incredible high demand/high margin side of what you do, that is a good problem to have. We suspect the numbers will be strong for upcoming results for all of these memory companies.
Now, strong numbers certainly doesn’t guarantee a higher stock price (sometimes it is already priced-in). These stocks are expected to be volatile and have massive implied volatility in their options. For example, MU is expected to move by 70 points (a 140 point wide probability cone) from now to March expiration. Competitors like WDC, SNDK and others have similar I.V. in the options. That is why the butterfly has such an excellent risk/reward. We think even though a lower probability setup, worth the opportunity.
Buy to open: MU Mar 19th (monthly) 270.00 strike call (ratio of 1)
Sell to open: MU Mar 19th (monthly) 300.00 strike call (ratio of 2)
Buy to open: MU Mar 19th (monthly) 330.00 strike call (ratio of 1)
Debit: 3.05
Max Risk 3.05 or $305.00
Max Reward 26.95 or $2,695.00