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Speculators Eye Salesforce.com, inc. (CRM) Amid New High

Bulls and bears are taking notice of CRM today

by 5/16/2013 2:01 PM
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Salesforce.com, inc. (NYSE:CRM) is seeing options activity on both sides of the trading fence today, after tagging a new all-time high of $47.31 just 30 minutes into the session. Roughly 19,000 calls and 12,000 puts have changed hands so far, which is about double the security's expected intraday volume. At the bullish end of the spectrum, speculators are betting on the stock to trek higher over the next several weeks, while one longer-term bear is counting on CRM to falter by November.

Jumping right in, nearly 1,800 calls have crossed at the June 47.50 strike at a volume-weighted average price (VWAP) of $1.86. A large portion of these contracts traded at the ask price, and implied volatility has climbed 1.1 percentage points since the opening bell -- indications of buy-to-open activity. In other words, speculators will profit if the stock surmounts the $49.36 level (strike price plus the VWAP) by back-month expiration. The delta for these options rests at 0.43, meaning they have a 43% chance of moving into the money ahead of the close on June 21.

Meanwhile, the November 45 strike has seen 1,037 puts change hands -- most of which traded in one large block for an ask price of $3.60. Since this option is currently home to open interest of just 248 contracts, it's likely that new positions were added here. In this particular scenario, the put buyer is expecting the cloud computing firm to retreat below breakeven at $41.40 (strike price less the premium paid) by Nov. 15th's closing bell. This represents a decline of 10.3% from the equity's present price of $46.17.

Widening the sentiment scope shows that traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been favoring Salesforce.com, inc.'s calls over puts lately. The stock's 10-day call/put volume ratio checks in at 1.19, indicating calls bought to open have outstripped puts during the past two weeks. This ratio resides in the 89th annual percentile, meaning speculators have purchased calls over puts at a faster clip just 11% of the time during the past year.

Examining CRM's technical backdrop, the shares have gained about 10% year-to-date, and more than 35% on a year-over-year basis. What's more, the stock's recent pullback was contained by its 40-week moving average, which has served primarily as support since February 2012.


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