r/thetagang
MU Earnings: The Short Vol Trades
Author discusses short volatility options strategies for MU earnings, betting on IV crush rather than a directional move.
MU reports after the close.
Current setup:
- Stock: \~$1,016
- IV: \~193% (2DTE)
- Expected move: ±$117 (\~11.5%)
- Little skew either way
The two cleanest expressions here are in my opinion these::
- ATM short straddle (\~$117.5 credit)
- 905P / 1120C short strangle (\~$35 credit)
https://preview.redd.it/i7zpdgplba9h1.png?width=1172&format=png&auto=webp&s=9de3ba57d822bec1fce2783ffd52f56100a1c534
Personally leaning toward the strangle with small sizing (\~0.65% account risk). The thesis is simple: realized move < implied move and IV gets crushed after earnings.
Obviously this is short gamma into one of the biggest AI-related earnings reports of the quarter, so a gap-and-go move can get ugly quickly. This earnings report can either make or break the market.
For those trading MU:
- Selling premium?
- Buying premium?
- What move are you actually expecting after the report?
Curious how everyone is positioning.
If the expected move is $117 its probably actually going to move $200, GL
🎯
Semiconductor earnings have a special talent for making the options market look naive. I've seen "expected move" become a sick joke more times than I can count with these AI-adjacent names, especially when the whole market is treating the report as a macro event.
That said, the strangle does give you some buffer before things get truly painful, and 0.65% sizing shows OP isn't going full degen on this. If the move stays inside the wings, the IV crush alone does most of the work the next morning.
Still, with whisper numbers floating around and guidance being the real wildcard, I'd personally want to see how the first 30 minutes of after-hours action shakes out before committing. Plenty of traders have been burned legging into these right before a gap that just never fills back.
How are you going to enter a strangle for earnings when you want to see how the first 30 minutes of after-hours action shakes out before committing?
Don’t you have to commit before market close?
Or are you saying you’d open the position tomorrow morning after IV crush?
The fact that you say that you’ll enter an options position on the after market negates anything else you might say… please refrain from options trading until you learn it.
I for one am not willing to bet that the stock who rallied 2.5x in a quarter will stay within its IV range on earnings
That's fair. I opted for a diagonal spread after all. Only selling the short term $850P and went long the $900P on 58DTE. Just to have some cushion.
Seems like I will still be losing money on this one. Lol
Guhhhhhhhh
I did well with MU today. I was replacing shares in BOXX that I use to park funds. MU was down about 2%. Ultimately, I bought 200 shares at $1024 and sold a call at $1100, Exp 7/31 for $103.47 ($10,347) in premium. This was around 15 minutes before market close. MU spiked big time, will take time to settle down. Currently I up $29k.
Update, TastyTrade allows 24 hr trading. I sold 100 shares of MU that I bought at $1024 for $1205, locking in $18,100 profit.
1190 already AH.
1213 now AH
sitting this one out personally. IV at 193% already screams the market knows something and trying to pick the pocket of a stock that's moved 2.5x in a quarter feels like pushing my luck. the strangle credit is fine on paper but one gap and you're sweating through your shirt watching the underlying rip past your short strike before you can blink.
i'd rather be long premium here or just watch from the sidelines with popcorn. if you must sell something, keeping it tiny makes sense, but expecting realized to stay inside implied on a name this hot is brave mate. also who knows what the AI narrative does to sentiment post print, could easily be a buy the news event regardless of numbers.
size down or don't play, that's my view. the 0.65% risk number is sensible but gamma doesn't care about your position sizing when mu opens 8% higher and never looks back.
PCE gonna shit all over this tomorrow.