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Put writing has been a popular strategy in Oracle Corporation's (NYSE:ORCL) options pits of late, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the past 10 sessions, in fact, speculators on these exchanges have sold to open 2.20 puts for each one they've purchased.
This trend continued last Friday, where more than half of all the ORCL put volume consisted of a massive block of 11,767 weekly 9/26 39-strike puts that were sold to open for $0.53 apiece, resulting in an initial credit of $623,651 (number of contracts * premium collected * 100 shares per contract). This also represents the maximum potential reward on the play, should ORCL finish north of $39 at the close on Friday, Sept. 26. Should the stock breach the strike price, though, the put writer could be at risk of assignment, and face potentially steep losses. At last check, shares of ORCL were lingering near $40.70.
One of the main directives given to those implementing a short-put trade is to look for potential areas of technical support, and it appears Friday's put seller did just that. Specifically, the equity has been ushered higher by its 140-day moving average for nearly a year, and last week, this rising trendline emerged as a steady layer of support. What's more, this moving average currently coincides with the round-number $40 mark, as well as a heavy accumulation of put open interest in the front-month series of options, which could reinforce this area as a foothold in the near term.
Meanwhile, Oracle Corporation (NYSE:ORCL) is tentatively slated to unveil its fiscal first-quarter earnings report the week of Sept. 15. Over the past four quarters, the security has averaged a single-session post-earnings gain of 0.3%, which widens to 0.6% when going out one week.