Oracle Corporation (ORCL) Options Catch Fire Amid Legal Drama

Options are hot as Oracle Corporation (ORCL) slips on news of a lawsuit from a former employee

Jun 2, 2016 at 11:58 AM
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Oracle Corporation (NYSE:ORCL) is trading nearly 5% lower today at $38.35, following news that a former senior finance manager is suing the company for wrongful termination. The whistleblower alleges that she was fired after refusing to use improper accounting practices that were urged by executives -- allegations the firm denies. While the stock takes a hit, action is heating up in ORCL's options pits, where contracts are changing hands at roughly 11 times their typical intraday rate.

Puts are in the lead so far today, with more than 37,000 contracts on the tape, compared to 36,000 calls. Specifically, ORCL's June 36 put is popular, and it looks like some bearish speculators may be purchasing new positions at this strike. Further down, the weekly 6/3 39-strike put and call have both seen buy-to-open action. Meanwhile, a large strangle at the stock's weekly 7/8 35-strike put and 41-strike call may have been initiated, with 5,000 contracts traded at each leg.

Today's preference for puts is nothing new for ORCL -- in fact, today's margin is slimmer than what's been seen in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, the equity's 10-day put/call volume ratio of 1.86 ranks in the 89th percentile of its annual range. Near-term traders have also been more put-heavy toward ORCL than usual, with the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.15 seated higher than 80% of the past year's readings.

Pessimism toward ORCL is strong outside of the options pits, too. Half of the analysts providing coverage recommend holding or selling the stock. And short interest climbed nearly 12% during the last two reporting periods, to account for over a week's worth of trading, at ORCL's average daily volume.

On the technical front, however, ORCL hasn't given shareholders much to complain about, with a roughly 5% lead for 2016. Also, the shares' pullback today is being contained by the round $38 level, which supported the stock in early March, just before ORCL spiked to a year-to-date high. What's more, this level is home to heavy put open interest in the June series, meaning it could continue acting as support for Oracle Corporation (NYSE:ORCL) as front-month expiration approaches.

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