This was a play into earnings for an oversold bounce as the stock had just sold off 15% in the few weeks prior….well earnings were mixed and the stock sold off following the report which showed weakness in their hardware division. Stock has since stabilized and is trading up 1% from where I suggested the trade and up 5% from Friday’s post earnings lows…..Stock is gonna trade with the market at this point and if you remain bullish than this structure worked out well into the event as you defined your risk into a potentially volatile event in a very volatile market and you still have the potential to make money on the trade. If you want to stay long then I suggest covering the July 35 call for .04 and leaving your self with a naked long July 33 call which is less than 2% from being in the money and unlimited upside……alternatively the spread can be sold for .32 resulting in a small loss.
ORIGINAL POST JUNE 13TH, 2011:
ORCL stock is down about 12% since it made a multi-year high in early May.
-they report June 23rd after the close…..when they give guidance they will be one of the first large tech cap companies to offer outlook for the current period into calendar Q3, the exact period in which most are worried about a slowdown. [private]
-Street is overwhelmingly positive on the name with 35 Buys, 6 Holds and only 1 Sell.
-the implied move in the options market is about 5% vs the 4 qtr average move of 4%
If you want to play for a bounce back on overly negative sentiment and you think market is oversold and you are looking for vehicles to perform well in a bounce then consider playing from the long side with options….
-DEFINE YOUR RISK, THIS STORY HAS BEEN VERY ONE-SIDED AND IN THE EVENT OF AN EARNINGS HICCUP, GUIDANCE FOR BALANCE OF YR THAT IS BELOW EXPECTATIONS OR A LARGE ACQUISITION THAT THESE GUYS DO ANNUALLY, YOU DON’T WANT TO BE NAKED LONG IF YOU ARE A TRADER IN THIS ENVIRONMENT (SEE JNPR, CIEN AND BRCM)
TRADE: ORCL (stock reference $31.80) BUY the July 33/35 Call Spread for .45
-buy July 33 call for .65 and
-Sell July 35 call at .20
Break-Even on July Expiration:
btwn 33.45 and 35 make up to 1.55, above 35 make full 1.55
below 33 lose .45 or less than 1.5% of the underlying….