Here's The Catalyst That Could Drive 20% Upside In Micron

"Our industry discussions on NAND suggest pricing will be flat to up in 4Q on a like for like basis," the analyst explained. "Two contacts we spoke to suggested NAND (especially 2D NAND) is tracking higher into 4Q, while another said that while there was probably enough demand for 4Q prices to go up, it might make sense to hold pricing flat to help mitigate what could be pricing declines in 2018."

Meanwhile, the options market is "worried" about Micron's upcoming earnings report, the analyst continued. The options market is pricing in a move of 10 percent (in either direction), which is 2 percent more than the move shares typically realize over the past eight quarters. Also, the put-call skew is elevated not only in Micron but across the broader semiconductor complex. This implies that investors are "more worried about the industry and perhaps this fear is lifting the skew on MU."

Accordingly, investors should consider buying the Sept. 29, 2017, $34.50 calls for $1.49 each.