Options Pop as Oracle Corporation (ORCL) Takes Aim at Amazon.com, Inc.

Oracle Corporation (NYSE:ORCL) CEO Mark Hurd said the company will go "all-in" on its cloud strategy

Sep 19, 2016 at 2:21 PM
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After tumbling nearly 5% Friday post-earnings -- a move that creates an appealing entry point, according to Barron's (subscription required) -- shares of Oracle Corporation (NYSE:ORCL) are up 0.7% today at $39.19. This bounce comes after CEO Mark Hurd and Chief Technology Officer Larry Ellison took aim at Amazon.com, Inc.'s (NASDAQ:AMZN) cloud division at Oracle's annual developers conference over the weekend. One options trader seems to agree that the worst is over, too, and bet big on a near-term floor for ORCL stock.

Taking a quick step back, at Oracle OpenWorld this weekend, Hurd said the company is preparing to go "all-in" on its second-generation cloud strategy, and unveiled its purchase of cloud security startup, Palerra. Additionally, Ellison set his sights on Amazon, saying its "lead is over," and that "Amazon is going to have serious competition going forward."

Meanwhile, in the options pits, ORCL puts are flying off the shelves -- trading at two times what's typically seen at this point in the day. Plus, with nearly 21,000 contracts on the tape, put volume is in the elevated 94th annual percentile. However, not all of this activity is of the traditional bearish variety.

In fact, the stock's weekly 10/28 38-strike put is most active, due to a 10,730-contract block that was apparently sold to open for an initial net credit of $504,310 (number of contracts * $0.47 premium collected * 100 shares per contract) -- a theory echoed by Trade-Alert. This is also the maximum reward for the put writer, should ORCL maintain its foothold atop $38 through the close on Friday, Oct. 28, when the weekly options expire.

More broadly, put buying has been picking up speed in ORCL's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.18 ranks in the elevated 80th percentile of its annual range. In other words, puts have been bought to open over calls at a faster-than-usual clip.

Looking at the charts, last Friday's plunge was quickly halted by ORCL's 200-day moving average -- a trendline that has contained a number of pullbacks since the stock's mid-March bull gap. Longer term, the shares of Oracle Corporation (NYSE:ORCL) have gained 7.2% year-to-date, and haven't closed a week south of $38 since early March.

ORCL daily chart

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