OPR 395: Starting New Year with a Long Straddle in MU

·21 min·2 clips

Micron Technology hasn't seen $95 since 2000—will it finally break out to new highs?

The episode opens with host Brian Overby introducing the show and its educational focus on options strategies, sponsored by Ally Invest. He briefly mentions a personal anecdote about a white Christmas in Wisconsin before diving into the main topic. Overby selects Micron Technology (MU) as the stock for analysis, noting it closed at $95.11 and is approaching its all-time high of $97.50 from 2000. He explains that the strategy of choice is a long straddle, which involves buying both a call and a put at the same strike price. Overby cautions against using long straddles around known events like earnings due to inflated implied volatility, preferring instead to identify stocks at technical 'precipices'. He references a previous analysis on the Ally YouTube channel's Stock Play of the Day, where he discussed a long call spread on Micron, but now sees a straddle as more feasible. The host draws a parallel to a past successful long straddle on Boeing during its plane-grounding crisis, where random news events created volatility. For Micron, he notes a 36% implied volatility and the stock's low P/E ratio relative to peers, plus its recent announcement to resume dividend payments after decades. Overby details the specific trade: buying the February 25th expiration $95 strike call and put for a $9.53 debit ($953 plus commissions). He emphasizes this is a paper trade for educational purposes. To assess risk, he compares the 44-day straddle to a 16-day one, estimating the true risk at about $4 if held for 30 days without movement. The host outlines an exit strategy: he would hold for 20 days, and if the stock moves, aim to sell one side for at least $10 to cover the trade's cost, then let the other side ride. He concludes by soliciting listener feedback on adjustments and promoting the show on social media, ending with the show's standard outro.

As heard by us

A Micron long straddle becomes a clear lesson in probability, implied volatility, and earnings timing.

Options Playbook uses a possible Micron long straddle to test a familiar options premise: expecting a stock to move is not the same as finding a trade with favorable odds.

Read the full review in PlayNext →

Why you'd press play

Want a sharper way to test whether a Micron options move is really big enough?

Read the full recommendation in PlayNext →

Listen to the show on

Apple Podcasts Spotify

Play clips from this episode More from Options Playbook Radio