Closed: Profit $71.40
|MU Long Put Spread|
|MU Jul02 22.50 Put||-1||0.222||3.43||-320.8|
|MU Jul02 23.50 Put||1||0.508||4.43||392.2|
Micron Technology (MU) showing some high vols with a decent downtrend. Stock has been pretty choppy but the overall trend for the past year is negative. The shares have just slightly bounced off recent lows, so I probably should have waited a little longer to establish this position but the payoff profile looked pretty good as it was.
Breakeven on the downside is $23.46, which based on the current stock price of $24.22 and 37% vol gives only a 28.13% chance of trading below that. But the payoff if below is $73 compared to a max loss of $27 if the stock stays above that by expiration.
The vol skew paints suggests that the market expects the stock to rally as the call prices increase;
And here is the historical vs implied vol graph;
I placed my order to buy the $22.50 and $23.50 put spread for a debit of $27 and was filled on that order;
Update 3rd July
MU closed the week out at $19.07. The put spread expired at its' max value, less the premium paid leaves a profit of $71.40. Here's the chart after the close on Friday;