Pre-Earnings Option Skeptics Eye Oracle Corporation (ORCL)

Oracle Corporation's December 42 put was bought to open yesterday

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Published on Dec 4, 2014 at 10:14 AM
Updated on Apr 20, 2015 at 5:32 PM

Oracle Corporation (NYSE:ORCL) closed 0.3% south of breakeven yesterday, at $42.06. In options land, puts flew off the shelves at nearly three times the average daily pace, and outstripped calls 18,000 contracts to 12,000. What's more, the stock's 30-day at-the-money implied volatility rose 3.4% to 20.9%, hinting at elevated demand for short-term options.

Digging deeper, the December 42 put was ORCL's most active strike, as close to 8,600 contracts changed hands. The vast majority did so at the ask price, open interest spiked overnight, and Trade-Alert confirms buy-to-open activity.

In sum, these traders rolled the dice on a short-term descent in ORCL shares. Specifically, they expected the stock to dip below $42 by the close on Friday, Dec. 19, when front-month options expire. They're in luck: The equity has shed 0.5% today to trade at $41.85, bringing the put into the money.

Prior to expiration, Oracle Corporation (NYSE:ORCL) will take its turn in the earnings confessional, after the close on Wednesday, Dec. 17. If past is prologue, this event could be a boon to yesterday's option bears. In the session following ORCL's last eight quarterly reports, the equity has given back 2.3%, on average.


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