Perhaps no industry was harder hit during this week’s tech drubbing than semiconductors. The sudden souring delivered substantial losses to many of this year’s big winners like Micron Technology, Inc. (NASDAQ:MU). But with its long-term trend still pointing decisively higher, this MU stock dip should be viewed as a buying opportunity.

For starters, the stock has already suffered a 19% decline over the past week returning it to the rising 50-day moving average and then some. And just like that its posture has flipped from overbought to oversold.

One of the critical pit stops during its ascent was $40. Back in October, it provided support as buyers assembled to defend against any and all bear raids.

With this morning’s drop, MU tested the $40 zone once more and so far it’s holding. Even if it gives way, there are numerous other support levels beneath with $33 being the most significant.

The speed of Micron’s fall lit a fire under implied volatility. Option premiums are expanding breathing new life into short premium strategies like naked puts. And that, I think, is the best way to play this beaten-down semiconductor.

Sell MU Puts, Collect Money

Since there is an earnings release before January expiration, options that expire in that month are trading rich. That will allow us to sell a far out-of-the-money put and still garner a respectable return.

If you’re willing to bet MU sits above $35 at expiration, or if you’re a willing buyer in that general area, then sell the Jan $35 puts for 80 cents.

If we sit above that level, then the puts will expire worthless allowing you to pocket the initial premium received. That is your max reward. If we fall below $35, you could exit to minimize your loss or ride to expiration and allow assignment.

You will be obligated to buy shares at an effective purchase price of $34.20 ($35 – 80 cents), which may not be a bad entry for a longer-term position.

As of this writing, Tyler Craig held bullish options positions in MU. Want more education on how to trade? Check out his trading blog, Tales of a Technician.