Guidance-Induced Slide Sparks salesforce.com, inc. (CRM) Put Buying

salesforce.com, inc. (NYSE:CRM) options are trading at 15 times the expected intraday rate

Alex Eppstein
Oct 5, 2016 at 10:35 AM
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Options action on salesforce.com, inc. (NYSE:CRM) is going through the roof this morning, after the cloud computing company provided a poorly received fiscal 2017 guidance update. The stock was last seen 7.8% lower at $66.98, while its options are crossing at 15 times the expected intraday rate. What's more, both stock and options volume are currently running in the top percentile of their respective annual ranges.

The most active CRM option is the weekly 10/14 62-strike put. By buying to open these out-of-the-money contracts, speculators foresee the shares tumbling below $62 -- territory not charted since February -- by next Friday's close, when the weekly series expires.

This is a bit unusual for CRM options traders. After all, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the shares have racked up a top-heavy call/put volume ratio of 2.65 during the past two weeks. Notably, this reading ranks near the top quartile of its annual range. Echoing the prevailing call-skew is CRM's Schaeffer's put/call open interest ratio (SOIR) of 0.56, which sits below three-quarters of all readings from the last year.

Optimism isn't hard to find elsewhere on the Street, either. A look at the brokerage crowd reveals extreme confidence in CRM, despite the fact it's pulled back rather sharply since toppling the $84 level in late May. By the numbers, 27 analysts rate the stock a "buy" or better, compared to a pair of "holds" and not a single "sell" opinion.

About the only sign of negativity is witnessed among short sellers. Specifically, short interest rocketed 28.6% during the last two reporting periods -- and could account for some of the call buying, as the bears could be hedging. Overall, however, a relatively slim 2.4% of CRM's float is sold short.

On the fundamental front, salesforce.com, inc. (NYSE:CRM) has been front and center in the supposed Twitter Inc (NYSE:TWTR) sweepstakes, and just yesterday made a $700 million purchase. However, according to a recent report, Fidelity Management -- CRM's largest shareholder -- would be unhappy with a TWTR acquisition.

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