r/options
Is selling deep OTM MU puts a decent play?
User considers selling deep OTM MU puts (strike $440, Dec 2026) citing sold-out inventory into 2027 and predictable earnings as reasons for low downside risk.
- Company guidance indicates inventory is sold out through 2027, suggesting strong demand visibility.
- Earnings predictability for the remainder of the year reduces the likelihood of negative surprises.
- The proposed strike price ($440) provides a significant safety margin relative to current trading levels.
- Historical volatility shows the stock traded at $330 post-earnings, indicating potential for sharp corrections.
- Cyclical semiconductor stocks can face unexpected demand shocks despite long-term sold-out status.
- Capital efficiency may be low due to the high collateral requirement for deep OTM naked puts.
Yesterday I saw 12/18/2026 MU put at 440 selling for $32. If you consider the minimum collateral required, it seems like a decent return.
It seems pretty unlikely for the stock to stop to 440 by end of year, especially considering that MU says they are sold out into 2027, their earnings for at least the rest of the year will likely be predictable with no big surprises.
But I don't know. Given that the stock was at $330 AFTER the most recent Q2 earnings call, it's not impossible. Thoughts?
Yes, can't go wrong at all. Do it!
How could anything go wrong??
At the casino, anything can happen, good luck!
You’re getting $3,200 while risking/tying up $44,000 in capital for about 6 months, so effectively a 14.5% rate of return. It’s not bad. MU put premiums are likely extremely high due to the 10%%+ drop yesterday, but depending what the stock does Monday the value may not still be there.
I got a 3.4% return just on a two week PUT at $50 for DRAM. The premium was too good to pass up
At the dotcom bubbe bust Micron fell more than 90%. Although this is only a distant danger I would not do this without a hedge.
Same trade, but buy the 430 Put as your second leg. Sell 15 contracts and your collateral is $15,000 vs $44,000. Same premium less capital tied up.
Not financial advice. I would never tie up that much capital for 6+ months, but you do you boss. I like the 20 delta short put at 7 dte and adding a long put at 20 strikes lower for a $20 wing. $350 premium on $2000 risk. Go higher on your delta if you are bullish and want a better return.
It's an annualized rate, but about 7% for 6 months
Haha I thought this was WSB
It is one of the cheapest stocks in the market on a forward earnings basis. Whether you believe those forward earnings will materialize is the real question. You might get burned if you bet against the crowd
Do you mind forking over 44K and owning it for a cost basis of 408/share. Or would you be willing to spend thousands to get out?
From what I see, MU went from 200 to 400 in about two months and 400 to 800 in about two months. If it reverted at the same rate, you could own MU trading at 200/share in December
There is somewhat the expectation of a global recession precipitated by the Middle East oil, fertilizer, and helium situation that may take a very long time to resolve even in the unlikely event of a quick resolution to the war, as well as global debt levels. It might be argued that the recession will cause a decrease in interest rates as has occurred in the past which might help with AI project development. So lots of unknowns which usually implies volatility. Perhaps your time to expiry is too long and it might be better to sell multiple put contracts with shorter DTE?
Consider btc at 50% profit?
You are paid upfront U$32 for $440. That is 7% discount for a great company even if you are assigned. So what is the big deal?
Buying a call and selling a put is a synthetic long, you maybe meant buy a put one strike below so it's defined risk / limited upside.
The expected move for Dec 18 as indicated by the at-the-money straddle value is 410. Therefore, it is possible that MU will be below 440.
The collateral for the 440 put is about 8800 but will increase if MU drops in price. It will be at least 21K if MU is 440.