ELI5: How does the option work? MU Spread

Micron Stock Trade Idea
Buy MU May $55 Calls and sell MU Apr $55 calls for a $1.20 net debit

Maximum risk on the trade is $1.20 per spread. Ideally Micron stock closes near $55 at April expiration to realize the maximum gain. The trade structure also allows selling additional shorter-term weekly calls if the April options expire worthless to harvest even more premium.

Source: https://finance.yahoo.com/news/time-throw-chips-pot-micron-135601938.html

1 Like

That’s an interesting trade. Max profit is actually closing below $55 on the April expiration then increasing in value above $55 before May expiration. I’m not a huge fan of buying OOM calls. The stock needs to go up by over 10% to make money.

1 Like

Bought 10 calendars :slightly_smiling_face: