Oracle calls: 700% profit in one day

Orcl622

Bullish traders saw huge gains today on option positions that were opened just ahead of Oracle’s blowout earnings report.

Minutes before the company’s quarterly results yesterday afternoon, Investitute’s tracking systems showed that 10,700 Weekly $48 calls expiring tomorrow were purchased mostly for $0.44 to $0.52 with shares at $46.54. Open interest in the strike was only 1,611 contracts before the trades occurred, showing that they were new positions.

Those calls traded for $3.81 this morning, a gain of about 700 percent overnight. The stock rose 11.2 percent at the same time, underscoring the kind of leverage that can be achieved through options. (Investitute co-founder Jon Najarian cited the winning trade on CNBC’s “Halftime Report” today.)

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

ORCL surged 8.57 percent today to close at $50.30 after reaching a 52-week high of $51.85 right after the open. The cloud-software and database company rallied after beating estimates on the top and bottom lines while providing strong guidance.

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Mike Yamamoto | Investitute

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