U.S. Markets open in 9 hrs 26 mins
  • S&P Futures

    3,451.50
    +2.25 (+0.07%)
     
  • Dow Futures

    28,285.00
    +17.00 (+0.06%)
     
  • Nasdaq Futures

    11,669.00
    +19.25 (+0.17%)
     
  • Russell 2000 Futures

    1,632.10
    +1.50 (+0.09%)
     
  • Crude Oil

    40.64
    0.00 (0.00%)
     
  • Gold

    1,907.80
    +3.20 (+0.17%)
     
  • Silver

    24.74
    +0.03 (+0.11%)
     
  • EUR/USD

    1.1802
    -0.0024 (-0.2006%)
     
  • 10-Yr Bond

    0.8480
    +0.0320 (+3.92%)
     
  • Vix

    28.11
    -0.54 (-1.88%)
     
  • GBP/USD

    1.3068
    -0.0012 (-0.0928%)
     
  • USD/JPY

    104.7170
    -0.1230 (-0.1173%)
     
  • BTC-USD

    12,964.40
    +59.42 (+0.46%)
     
  • CMC Crypto 200

    261.32
    +5.22 (+2.04%)
     
  • FTSE 100

    5,785.65
    +9.15 (+0.16%)
     
  • Nikkei 225

    23,566.02
    +91.75 (+0.39%)
     

Understanding Micron Technology's Unusual Options Activity

Benzinga Insights
·2 mins read

Micron Technology (NASDAQ: MU) shares experienced unusual options activity on Friday. The stock price moved up to $45.1 following the option alert.

  • Sentiment: BULLISH

  • Option Type: SWEEP

  • Trade Type: CALL

  • Expiration Date: 2020-09-18

  • Strike Price: $49.00

  • Volume: 711

  • Open Interest: 477

3 Ways Options Activity is ‘Unusual’

One way options activity can be considered unusual is when volume is exceptionally high. The volume of options activity refers to the number of shares contracts traded for a day. Contracts that have been traded, but not closed by a counter-party, are called open interest. A purchased contract cannot be considered closed until there exists both a buyer and seller for the option.

Another gauge of unusual options activity is a contract with an expiration date in the distant future. Additional time until a contract expires generally increases the potential for it to grow its time value and reach its strike price. It is important to consider time value because it represents the difference between the strike price and the value of the underlying asset.

“Out of the money” contracts are unusual because they are purchased with a strike price far from the underlying asset price. “Out of the money” occurs when the underlying price is under the strike price on a call option, or above the strike price on a put option. Buyers and sellers try to take advantage of a large profit margin in these instances because they are expecting the value of the underlying asset to change dramatically in the future.

Understanding Sentiment

Options are “bullish” when a call is purchased at/near ask price or a put is sold at/near bid price. Options are “bearish” when a call is sold at/near bid price or a put is bought at/near ask price.

Although the activity is suggestive of these strategies, these observations are made without knowing the investor’s true intentions when purchasing these options contracts. An observer cannot be sure if the bettor is playing the contract outright or if they’re hedging a large underlying position in a common stock. For the latter case, the exposure a large investor has on their short position in common stock may be more meaningful than bullish options activity.

Using These Strategies to Trade Options

Unusual options activity is an advantageous strategy that may greatly reward an investor if they are highly skilled, but for the less experienced trader, it should remain as another tool to make an educated investment decision while taking other observations into account.

For more information to understand options alerts, visit https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts

See more from Benzinga

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.