Micron's monster post-earnings rally is almost gone. Traders divided on where it goes next

Micron Technology's monster post-earnings rally is almost gone.

Shares of the maker of memory chips traded as low as $1,023.65 on Monday, down 18% from the 52-week high reached on Thursday. Monday's session low is also nearly $25 below the stock's closing level on Wednesday before Micron reported fiscal third-quarter revenues that blew past analyst expectations.

The sharp about-face has spurred some dip-buying among options traders in Micron, but flows across the sector are sharply divided depending on the stock or ETF.

Micron Technology shares in the past five trading sessions

In Micron, call volume outpaced puts but more calls were likely sold than bought, according to data from ThinkOrSwim. Of the $2.2 billion in premium traded by midday Monday, $1.6 billion was tied to calls, with seven of the top 10 contracts by volume calls, and all expiring Thursday, SpotGamma data show.

The VanEck Semiconductor ETF (SMH) added about 3% on Monday — despite Micron's dip — as Seagate Technology and Western Digital added 8% and 10%, respectively. The latter two stocks rose following a bullish initiation by Melius Research that said both could rally roughly 60% from current prices.

Call volume was almost double puts across Seagate and Western Digital, though the two traded less than 40,000 options in total. In Western Digital, where about 27,000 contracts traded, 3,000 calls were bought compared to just 1,000 puts. The most popular contract by volume was the 700-strike call expiring Thursday, an $8.50 trade that needs a 10% rally to pay off.

Flows in the SMH ETF skewed notably bearish – which they have for much of this summer – with put volume more than three times higher than calls. Traders bought almost 11,000 puts, compared to just 3,500 calls.

Volatility in the SMH is about 60, arguably making it a preferable vehicle for hedging compared to single stocks, where implied volatility is still the highest in the market. The most popular contract in SMH is the 560-strike put expiring Aug. 21.

Bulls are still showing a preference for the Roundhill Memory ETF (DRAM), where almost 300,000 contracts traded, and more than twice as many calls were bought than puts. Still, even the euphoria here may be fading some, with more calls sold than bought.

One bullish trader in DRAM collected over $3 million selling 2,200 of the 80-strike puts expiring Dec. 18 for $5.2 million and buying almost 3,000 of the 40-strike puts expiring June 2027 for $2 million.