Bulls keep winning in $MU

Option traders turned fast profits on upside positions in Micron (MU) today for the second session in a row.

On July 19, Investitute’s market scanners identified the purchase of 10,000 August $49 calls for $0.53 to $0.60 with shares at $44.86. This was clearly fresh buying, as open interest inthe strike was only 1,417 contracts before the activity appeared. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $1.38 today, about 2.5 times their average purchase price. The stock rose less than 5% in the same time frame, showing how quickly options can far outperform their underlying shares.

It is the third winning trade in the name posted on Investitute since June 18.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

MU is up 3.93% to $47.31 this afternoon. Goldman Sachs upgraded the memory-chip maker to “buy” from “neutral” this morning and raised its price target to $56 from $40. The stock had already rallied after quarterly results on June 25 and rose again last week after rival Taiwan Semiconductor Manfacturing (TSM) reported strong earnings and revenue.

<i>(Disclosure: I am long MU.)</i>