IveBeenEatingWell

Spoke with some friends in the plastics business. They are just about out of raw materials and cannot find new supplies as China restricts exports of petroleum-related downstream products. This is going to get much worse before it gets better.

$MU - Memory supercycle with 2026 HBM capacity fully booked and 300%+ earnings growth expected as AI-driven demand collides with tight supply. $SNDK - Up 1,600% post-spinoff from Western Digital, riding the severe NAND shortage with AI data center demand accelerating through 2026. $WDC - Dominant HDD market position (63% share) with sticky enterprise contracts offering downside protection as AI storage needs explode. $STX - AI data storage demand surge with quarterly beats driving the stock 35%+ year-to-date alongside memory peers.

So what's up with Micron Technology $MU? Why did so many analysts lower the price targets but still rated it as Bullish? A bit contradicting isn't it? Well, here's the answer. The DRAM spot prices have been mostly flat. The 'recovery' didn't come as soon as they initially thought. They are humans too and got euphoric too early. Remember, many predicted the rates to happen earlier this year instead of last week. The rates have a lot of influence to cyclicals. There is also this thing called DRAM contract prices which is different from spot prices. Contracts as the name implies, is an agreement between Micron and the buyer. These contract prices have actually gone up 5-10% which is bullish for Micron for near term BUT.. the next wave of contracts might be neutral as spot prices has been mostly flat, a good indicator for DRAM demand. So why do companies make contracts? Two reasons: it's more predictable in their balance sheet which in turn is acts as a hedge against unexpected DRAM price fluctuations. My suspicion is that the contract prices got inflated early this year due to the whole AI and Rate Cut euphoria and companies rushed in to make DRAM contracts before it goes up 'too much' So while DRAM contracts may not be a problem for Q4 (Weds), it's an uncertainty for Q1/Q2 2025. The recovery is on its way but the rate cuts didn't happen until just a week ago. I don't know how fast the the benefits of rate cuts will materialize to DRAM prices. So what else can $MU do? Answer: SHIP a TON of HBM (Super Fast AI Memory) to $NVDA, $AMD and $AVGO. In Q3 Micron made about $100M in HBM sales. I am expecting about $200-300M in Q4 HBM sales and I am guessing $400-500M for Q1 2025. HBM is orders of magnitude more expensive than DRAM and its highly margin accreditive (it adds shit ton of earnings per share). They are expecting billions for 2025 and having more than $NVDA as its customer base will help to re-negotiate the prices to a more premium (10% more in 2025). Furthermore, over the last 2 quarters, Micron has been making huge improvements on HBM wafer yields (as all semi companies do over time) and this will add extra margin to their dollars. The market reaction will be all about guidance. The double beat is a requirement. It's already baked in. So IF Micron is able to surprise the market with a huge HBM sales guidance for the next a couple of quarters, market could react positively. I think elevated DRAM contract prices will not come until 2nd half of 2025. Neutral DRAM + Bullish HBM could move the needle. On our charts, $MU is still BLUE candled, meaning its bullish cycle remains intact. Remember playing earnings can be nerve-wracking even if you have a high conviction. I am long in $MU, we are not selling until DRAM prices have fully recovered.

Trade idea that I published to my shower thoughts channel: Korean Index volatility arbitrage and taking advantage of Black-Scholes models. $EWY long options seem mispriced. This is Blackrock's Korea Index, which is majority memory (Samsung Electronics, Sk Hynix). The stock swings 2-5+% a day, and is up 136.25% 1Y, despite priced like a normal index IV. Samsung is volatile. SK Hynix is volatile (eg. 65% - 80% est). But the combination of the two through the index is priced way less than both low beta $GOOGL (37.33%) and $AMZN (39.12%) at ~32% IV. I've been watching $EWY for a bit and it does look volatile. As for pricing my guess is MMs priced in IV based on historical averages (5-10 years), where the Korean index was completely flat. And were expecting calls 2 years out to revert to the mean. But this volatility should be the new norm as markets price in the new memory supercycle (eg. $TSM went from 30% IV to 46.2% IV). Long calls should benefit from both Samsung + Sk Hynix carrying the index. And the main benefit is vega expansion that you won't get from $KORU. You also can't get this option MM pinning like individual US stocks since this is Korea's national index and long term. TLDR: Individual components SK Hynix + Samsung are highly volatile. They're basically half of the index, but options in index are priced with low volatility, perhaps due to historical 5-10 year data. Long calls benefit from vega expansion that weren't priced in correctly as MM forward vol estimates are anchored too heavily on historical realized vol, which was low for $EWY over the past 5-10 years