Seize the advantage in Micron options against the SK Hynix listing, Jeff Kilburg says
Investors brace for the SK Hynix shockwave. SK Hynix is debuting its ADRs under ticker symbol “SKHY” on the Nasdaq Friday. At $29 billion, it is the largest foreign IPO in U.S. market history. SK Hynix controls roughly 60% of the high-bandwidth memory market, and this massive influx of fresh supply is forcing a real-time capital rotation across the entire semiconductor and hardware infrastructure space, providing U.S. investors a direct alternative to Micron Technology, specifically. I want to use options in its competitor Micron to express a view, at the same time SK Hynix is enduring some price discovery. Capital rotation is already underway, putting immediate pressure on Micron, which was down about 3% on the open Friday. As the market is using Micron as the primary funding trade and proxy for this event, MU options are seeing massive activity, with nearly 700,00 options contracts trading off of the open (about 87% of the usual daily volume in MU) indicating heavy hedging or directional bets as the memory chip trade repositions. Focusing on the dispersion caused by the SK Hynix listing provides a potential opportunity. Micron’s Implied Volatility (IV) rank is currently sitting at 92%. Even more fascinating is the pricing asymmetry: the call skew on Micron is massive right now, making upside options significantly more expensive than equidistant downside options. Furthermore, the near-term options market is pricing in an expected move of roughly plus or minus $82. Trade Bearish Call Credit Spread (Fading the Skew) In an attempt to short-term (one week expiration) capitalize on the historically expensive upside Micron options, this call spread seeks to fade the call skew. Sold MU 7/17/2026 $1,050 call for $27 Buy the MU 7/17/2026 $1,075 call for $21 An investor will collect $6 over the next week Micron was chopping around $975 at the time of this call spread’s execution Here I try to take advantage of the massive call skew. If the new SKHY listing creates a drag on MU and keeps it from surging, those expensive upside calls will decay rapidly. As long as MU stays below $1,050 at expiration, an investor will collect the premium in this credit spread. The extreme call skew currently priced into Micron’s options chain speaks volumes into how traders are tactically approaching the elevated implied volatility. DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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