Micron Put Options Volume Jumps as Stock Heads for Worst Slump Since 2020

The stock tumbled almost 17% to $8643 at 1:30 p.m., boosting the appeal of put options that can protect holders against further declines. More than 316,000 put options were traded so far across 19 expiration dates that stretch through Jan. 15, 2027. That's more than five times the 20-day average.

"We are now seeing a more pronounced impact of customer inventory reductions," Chief Executive Officer Sanjay Mehrotra said during Micron's earnings call with analysts Wednesday night. "As a result, our fiscal  Q2 bit shipment outlook is weaker than we previously expected."

The company forecast adjusted revenue of $7.9 billion, plus or minus $200 million, for the quarter ending in February. That missed the $8.99 billion Bloomberg consensus. Adjusted earnings for the period was seen at $1.43 plus or minus 10 cents, lower than the $1.92 expected by analysts.

That weaker outlook more than overshadowed the company's first quarter earnings beat that was aided by a 400% jump in data center revenue and its continued market share gains in the highest margin business. The stock is also benefiting from increasing demand to materials that power artificial intelligence applications.  

"While consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year," Mehrotra said.

The CEO's words weren't enough to assuage investors. The stock tumbled as much as 18.6% to $84.61, the lowest intra-day level since early September. While it bounced off the lows, it's still down 16.6%. A close at that level would mark its steepest decline since early March 2020, when the global pandemic fueled a massive sell-off in equities.

Put options that give the holders the right to sell Micron shares at $85 by tomorrow attracted the heaviest volume among the contracts tied to the stock, with more than 22,000 traded so far. That surpassed the 12,680 open interest. The price of those puts jumped 84% as the stock slump increased the probability that the contract would be in-the-money before it expires.

The average target price for Micron set by analysts tracked by Bloomberg fell to $135.33 from $142.35 yesterday, before the company released its financial results, data compiled by Bloomberg showed.

"Softness in consumer-related markets likely lingers into 3Q, given seasonality and limited near-term catalysts," Jake Silverman, an industry analyst at Bloomberg Intelligence wrote in a note yesterday. "Lackluster NAND sales could push margins lower in fiscal 2Q and into 3Q on under-utilization." Still, the company may return to growth in its fiscal fourth quarter as demand improves elsewhere, he said.

JPMorgan analysts including Harlan Sur shared that optimistic view on the company's prospects.

"Despite the near-term weakness, we continue to believe the down-cycle in memory will be short-lived and expect market conditions to improve in the latter part of 2025 as leading-edge DRAM supply remains tight and strong AI server demand continues to drive growth in HBM/DDR5," the analysts wrote in a note to clients Thursday.

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