Western Digital storage rally, a $5.56 million bullish bet targeting $680?

Storage and chips are both ignited by AI demand. Last night, Western Digital surged 5% intraday and closed at $563. SanDisk and Micron in the same batch were even more aggressive. In the options flow, someone dumped about $5.56 million to buy 1,855 contracts of the July 31st expiry, $650 strike Calls. This is betting that Western Digital will move up significantly further within two weeks. Based on the premium cost averaging down to about $30 per share, the breakeven point is at $680—meaning it needs to rise over 20% from the current $563 before this trade starts making real money.

I agree with the direction of this trade, as the supercycle in storage hasn't run out of steam yet. However, first, the expiry is only two weeks away, which is very short. Second, the implied volatility (IV) of Western Digital's options has already hit its highest level in nearly a year (IV Rank maxed out around July 1st, IV around 107%). This is almost like paying for time at its most expensive. Even if the stock price slowly grinds higher, once volatility recedes, the premium will be nibbled away first.

This can be seen as an aggressive bet on the continuation of the storage boom. The logic is sound, but buying with such a short expiry and high volatility makes the risk-reward ratio not cheap. I'm going to watch if Western Digital can first stabilize above the previous high of $601. If it can break above that, then this $650 strike might have some potential. Otherwise, it's just paying time premium to the sellers.