Micron Aug31 Strangle
Micron has been very volatile for months now since earnings when they topped over $1200. The intensity has backed off from over a 100%+ volatility rating on options down to ranges where it’s between 50% and 65%. I loved it when it was over 100%, but I have to be honest, it’s getting a bit easier to manage now that the volatility has died down a little.
Still MU stock price has been all over the place, so the option plays are equally as erratic. Friday Aug28th, MU closed the day at $932.86 -$2.53 -.27%
That’s actually a pretty minor daily change for Micron. All last week I have been setting up a strangle attempting what I call a “FieldGoal” that have been going wide right (through the PUT side) each time. That’s ok though, because each time a FieldGoal misses, it still catches some profit on the other side, just not 100%. When that happens, we are rolling all options anyway, but one of them has to carry it’s money into the next setup.
Here’s the setup going into Mondays expiry, we will see if we can sail through the middle of not on this one. First I will show the basics. In the chart below we’re heading to a showdown again with the bottom end of the FieldGoal try. Think of the lower short PUT line (purple) as the right upright for a field goal kicker. The cyan colored lines are my short calls. They’re a little higher, and at this point in time appear to be the easy goal post to work with. See the comments after the image for the stats so far on these positions.
Ongoing Numbers
These short options exist until Monday August 31st when they will be moved somewhere else, or possibly just eliminated. My pattern though is to keep it going, and keep generating credit out of the option positions.
First lets take a look at the left uprights. The short calls shown by the cyan colored lines. These are above the price, so there’s not much heat on them at the moment.
The $965 short call has rolled a couple times now, this is #3. Up until now, this position has banked gains totaling +$1,779. There is $520 more riding on this position, and if the price stays below $965, then that $520 becomes realized gains, and we look for a new date and strike for the next position, and some new cash obtained by selling premium.
The $970 short call has had some more success, and has a trailing bag of gains totaling +$2,946, with the possibility of adding another $337 to that total on Monday.
On the other side of the goal posts, we have the single short put option at $930. This one only has a trailing history of gains of +$901 because the price keeps coming too close upon expiry, and doesn’t realize it’s full potential. This week that could all change if it can hold above $930 near the end of the day. In fact, if it can stay inside the right upright, the potential gain is to bank +$4,068 and if not, then we either give up those gains, and close for a smaller win, or roll for credit.
The short put side has been the more expensive option because of the price constantly testing the low end, that’s why the premium on it is so high.
What’s Next?
We have to see what happens Monday August 31 of course, but there’s two ways I see this going. If the price holds, and goes up a little, then the short put is something I am ready to take off the board, and focus on another one I have in the queue for Sep4$1000P. (See the next graphic). In that event, the short calls will roll toward that short put, and form a bit of an ambush because I already have a pair of short calls on Sep4 to hedge the short put.
Price Dip? If the price dips below $930, I have to decide where I am willing to decide if I take a smaller win, and eliminate it, or if I roll it out once again, and look for a chance on Weds Sep2 for another perfect FieldGoal opportunity.
No matter what happens, I have to keep my eye on the timeline coming at me like a conveyor belt. Here’s a look at the board for the next week .
My “Slinky” Map
This image above is my custom made mapping tool I made to plan my moves for days and weeks ahead. This is just a snapshot of the days for the week of Aug31 to Sep4 and where things are situated right now. As you can see I have a $1000P (short put) sitting out there on Sep4th. With the price close on Friday down at $932.86, this has a little ways to run before it can overcome that hurdle. Believe it or not though, for MU this is totally possible, and I can’t be careless about setting my short calls too low.
The good news is that both the short call and short put sitting at $1000 were both sold for those dates with very high premium because they were sold back on Aug11th, and Aug14th. At that time, there was still great uncertainty where MU’s price could go, so the market was willing to pay very high premiums on both those options.
When they’re stuck at the same price like that, it’s called a “Straddle” because we’ve got both options straddling a single price line. The $1010C a few bucks higher can be thought of as a strangle with the short put, but really what I am going for there right now is just to leave the cluster as is until the price action comes clearer, then I may step in and do some adjusting.
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