Berkshire Stake Lifts Oracle Stock, Helps Call Buyers

Near-term options traders have been targeting Oracle calls

Nov 15, 2018 at 9:21 AM
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Oracle Corporation (NYSE:ORCL) is trading up 3.8% before the open, thanks to news that Warren Buffett's Berkshire Hathaway (BRK.A) took a $2.13 billion stake in the tech company. The vote of confidence goes against the broader sentiment across Wall Street, since the majority of brokerage firms have just "hold" ratings on ORCL shares. Options traders, though, have been showing bullish tendencies.

Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 2.67, meaning call buying has easily surpassed put buying in the past two weeks. What's more, this reading ranks in the 75th annual percentile, so such a preference for calls over puts is quite rare.

Looking at some of those most popular contracts during this time span, the weekly 11/30 50-strike call led the way with more than 10,000 contracts added, followed by the weekly 11/23 50-strike call, where 8,300 positions were added. Also popular were the November 50 and December 52.50 calls. Anyone buying to open these calls is expecting ORCL stock to rise in the coming weeks.

This increased demand in options has resulted in higher premiums for near-term contracts. For example, the software concern's 30-day at-the-money implied volatility has risen to 25.7%, good enough for the 80th annual percentile, revealing higher-than-usual volatility expectations at the moment.

Looking at the charts, Oracle yesterday bottomed right at its rising 80-day moving average, a trendline that's often acted as a floor in recent months. The equity finally closed at $48.84, giving it a slim 3.3% year-to-date lead. Since its June bottom of $42.57, though, the security has gained almost 15%.


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