Oracle Puts Ramp Up After Berkshire Pivot

Put volume spiked after Berkshire Hathaway dissolved its ORCL stake

by Patrick Martin

Published on Feb 15, 2019 at 2:28 PM

The shares of Oracle Corporation (NYSE:ORCL) are in focus today, after Warren Buffett's Berkshire Hathaway (BRK.A) disclosed it had liquidated the entirety of its $2 billion (1.2% stake) in the software name at the end of December. Berkshire Hathaway's position lasted just one quarter. In response to the news, options traders have come out of the woodwork with a bearish tilt.

More specifically, more than 8,200 ORCL put options have changed hands today, double the average intraday amount and nearly double the number of calls traded. Most of the attention is on the February 51 put, where it looks like new positions are being opened, in a last ditch effort to lock in a profit by the time the option expires later today. 

On the charts, ORCL at last check was up 0.3% to trade at $51.58 -- on track for its eighth straight weekly win -- its longest weekly winning streak in at least 10 years. While the shares have added 21% since their Dec. 26 bottom near $42, the overhead $52 level looms, an area that stymied a rally back in October. Plus, ORCL's 14-day Relative Strength Index (RSI) now sits at 68 -- in the cusp of overbought territory, suggesting a short-term breather may be in the cards.

Daily Stock Chart ORCL

It appears options traders have been buying to open puts relative to calls at a quicker-than-usual pace for some time now. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the 10-day put/call volume ratio of 1.03 ranks in the 77th annual percentile.

Now may be a prime time for those looking to trade Oracle's short-term trajectory to do so with options. The equity's Schaeffer's Volatility Index (SVI) of 18% ranks in the 10th annual percentile, meaning short-term options are relatively cheap at the moment, from a volatility perspective.

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