Established Covered Calls Position in Micron Technology Inc.

Today, a Covered Calls position was established in Micron Technology Inc. (ticker MU) for the February 16th, 2018 expiration and at the $40.00 strike price when the stock price was $42.65. This is the first Covered Calls position established with a Feb2018 options expiration.   Micron's stock has declined since its earnings report on December 19th when it was trading at $44 per share just prior to its earnings release. 

One of the Screeners developed by the Covered Calls Advisor called the 'QVG Model' (note: 'QVG' stands for Quality, Value, and Growth and uses a combination of factors in these categories.  Micron is one of the stocks that was identified by this screen.  Schwab Equity Ratings, Credit Suisse Research, and Argus give Micron their highest rating. In addition, 28 of 31 analysts tracked by Reuters have Buy or Outperform ratings on Micron.

As detailed below, a potential return-on-investment result is +3.15% absolute return (equivalent to +31.1% annualized return for the next 37 days) if the stock is assigned on the February 16th, 2018 options expiration date.


Micron Technology Inc. (MU) -- New Covered Calls Position

Call options liquidity is very good with 13,395 open interest contracts for the Feb 16th $40.00 Calls.

As shown in the chart below, a Covered Calls positions was chosen instead of its synthetically equivalent short 100% Cash-Secured Put options position in this instance since the annualized ROI potential is higher for the Covered Calls:

You will notice in the chart above (click on chart to view a larger and more legible version) that there is a column titled "Intervening Earnings" and "NO*" with an indication that "If 'YES' then consider avoiding position".  Micron's next quarterly earnings report is after the February 16, 2018 options expiration date.
Also in the chart above is a column called "Intervening Ex-Div" and "NO" with an indication that "If 'YES' then complete Dividend Capture Strategy spreadsheet".  Micron does not currently pay a dividend, so the potential for applying a Dividend Capture Strategy is not relevant in this instance.

For this position, the downside 'breakeven price' at expiration is at $38.77 ($42.65 - $3.88), which is 9.1% below the current market price of $42.65. 

The 'crossover price' at expiration is $46.53 ($42.65 + $3.88).  This is the price above which it would have been more profitable to simply buy-and-hold Micron Technology stock until Feb 16th (the February monthly options expiration date) rather than establishing this Covered Calls position.

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