Event: ORCL report fiscal Q4 results Wednesday after close, the options market is implying about 4% one day move which is shy of the 4 qtr avg of 5.25% and 8 qtr avg of 4.65%.
I will do a much more in-depth preview of the quarter prior to Wednesday’s print, but I quickly wanted to highlight some options activity that caught my eye today, a day where total volume is running almost 5x average daily, and calls are outnumbering puts nearly two to one.
Traded in the market today: When the stock was $43.76 there was a large bullish trade in July 24th weekly expiration,. A trader sold to open 11,500 July 24th 42 puts at 71 cents and bought to open 11,500 of the July 24th 44.50/ 47 call spreads for 71 cents, the trade was done for even money, costing nothing aside from commissions.
Break-evens on July 24th weekly Expiration:
Downside: trader would be put 1.15 million shares down at $42, with losses below on July 24th expiration, with mark to market losses prior if the stock were to move closer to the short strike.
Upside: trader has long exposure to the tune of 1.15 million shares between 44.50 and 47, with gains up to $2.875 million, max gain above $47 or higher on July 24th expiration.
Techncials could be one of the main reasons for the trade structure.
A quick look at the one year chart shows obvious technical resistance at the previous high of $46.70, with nearly equally obvious technical support down at $42, which is also just below the stock’s 200 day moving average (yellow):
One other reason for the trade structure that includes two short legs is the spread between realized volatility (white line below, how much the stock is moving) vs implied volatility (blue, the price of options). While IV is lower than last quarter, so is realized, and options traders appear to be a tad bit more cautious than that of those just in the stock, when considering the very tight consolidation the stock has been in for months:
