Are you looking to invest in artificial intelligence but want to diversify beyond Nvidia? Look no further than Micron (MU), which has seen a 70% increase in its stock price over the past year. In this blog post, we’ll explore a smart options trade opportunity with Micron leading up to its earnings report.
Micron is a major player in the semiconductor industry, specializing in high-bandwidth memory and storage chips. Despite being much smaller in market value compared to Nvidia, Micron plays a crucial role in providing chips for Nvidia’s GPUs. While Micron did not generate a profit in 2023, consensus revenue forecasts are encouraging, with a 12% quarter-over-quarter increase expected.
Recently, Citi Research raised their price target for Micron from $95 to $150, citing expectations for Micron’s high margin chips to benefit from Nvidia’s AI systems. As we approach Micron’s earnings next week, the stock has already seen a 15% increase in the past month.
To capitalize on the bullish outlook for Micron, we are considering a call spread options trade. Buying the $105 May regular expiration call for $3.10 and selling the $125 May regular expiration call for $0.90, creating a debit spread that will cost an investor $2.20 per spread. This trade allows for potential gains if Micron’s stock price continues to rise.
While this trade carries risks, including the possibility of Micron reaching a new all-time high, the overall optimism surrounding artificial intelligence could continue to boost the stock. As always, it’s important to carefully consider your own financial situation and consult with a financial advisor before making any investment decisions.
Full disclosure: I am personally long on this call spread trade. Please note that the content provided is for informational purposes only and should not be taken as financial advice. Make sure to review our terms and conditions and privacy policy before proceeding with any investment decisions.
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