Micron Technology has been rampaging higher, and one investor is adjusting a winning trade before earnings come out.
optionMONSTER's Heat Seeker monitoring program detected the purchase of almost 18,000 October 31 calls for $3.10 and the sale of 11,700 July 26 calls for $5.40 on Friday. Volume was below open interest in the July contracts, which suggests that an existing position was closed and rolled forward in time.
Long calls lock in the level where a stock can be purchased, so they derive value from both their time and strike price. Friday's transaction increased their time value , which will protect the buyer against a drop if MU falls after its quarterly report on June 23.
But the new calls also maintain a net delta of about 1 million, which means that the trader will still profit from a rally. In addition to those benefits, he or she collected $738,000 of income from the July sale. (See our Education section for managing trades more effectively with options.)
MU rose 1.02 percent to $31.17 on Friday and is up 146 percent in the last year. The memory-chip maker has been riding a wave of strong demand and has reported better-than-expected earnings for four straight quarters.
Friday's total option volume in Micron was almost twice its daily average, with calls outnumbering puts by a bullish 4-to-1 ratio.
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