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Friday, April 12, 2024

Oracle Miss Weighs On Tech Stocks, Spurs Bearish Options Action In Cloud Space

Today’s tickers: ORCL, INFA, LEN & JAG

ORCL – Oracle Corp. – It’s clear from the 14.6% drop in Oracle’s shares to $24.91 today that investors are disappointed with what the Company had to show for its efforts in the prior quarter. The second-largest software maker yesterday posted fiscal second-quarter profits of $0.54 a share on revenue of $8.81 billion, missing average analyst expectations of $0.57 a share on sales of $9.23 billion. Put buying in the weekly options suggest some traders expect the stock to extend losses ahead of the holiday. Overall options volume on Oracle Corp. has surpassed 205,000 contracts just before 1:00 PM ET as strategists looked to initiate a variety of post-earnings stances, from bearish trades looking for more pain on the horizon, to more optimistic positions that point to potential recovery in the name. Though the report may represent a surprise to the downside for many, it looks like one options player may have read the tea leaves accurately ahead of the earnings release. The strategist appears to have sold around 16,500 long-dated Jan. 2013 $35 strike calls on Oracle back on November 22 for a premium of $2.62 apiece when shares in the software giant were trading around $29.00. The purchase of a large number of call options at the Jan. 2013 $35 strike today may mean the investor is taking profits off the table. It appears approximately 16,500 calls were purchased in the first 20 minutes of the session this morning for an average premium of $1.04 each. If the original seller of the contracts did indeed buy to close the short stance in call options today, he or she has exited the bearish position with net profits of around $1.58 per contract.

INFA – Informatica Corp. – Oracle’s big quarterly earnings miss dragged down the tech sector on Wednesday. A provider of enterprise data integration and data quality software and services, Informatica Corp.’s shares posted double digit declines in the first half of the session as second-quarter earnings and guidance from tech-bellwether, Oracle, spurred selling across cloud-computing names. Shares in INFA currently trade 10.3% lower on the day at $36.79 as of midday on the East Coast. One options trader positioning for shares in Informatica to extend gains in the first couple of months of the New Year initiated a bearish spread in the February 2012 contract. The strategist may be prepping for shares in INFA to hit fresh 52-week lows following its fourth quarter earnings release on January 26, 2012, should the company’s results similarly disappoint. It looks like the trader purchased a 3,000-lot Feb. 2012 $32.5/$37.5 put spread for a net premium outlay of $2.15 per contract. The strategist stands prepared to profit at expiration in the event that Informatica’s shares drop 3.9% to breach the effective breakeven price of $35.35. Maximum potential profits of $2.85 per contract are available to the investor should INFA’s shares plunge 11.7% to trade below $32.50 at expiration in February. The put spread on INFA is large relative to overall open interest on the stock of 6,892 positions.

LEN – Lennar Corp. – The homebuilding company’s shares gained as much as 5.05% this week on positive economic housing data, extending a rather impressive 64.0% rally off its October 4, 52-week low of $12.14 to hit $19.90 on Wednesday. The stock is off its highs of the session, however, and currently trades 0.30% lower on the day at $19.62 as of 12:30 PM in New York. A burst of activity in near term put options indicates some traders may be preparing for Lennar’s shares to surrender recent gains ahead of January 2012 expiration. Options on the homebuilding company are most active at the Jan. 2012 $20 strike, where more than 6,200 puts changed hands against open interest of 2,296 contracts. It appears trader purchased the majority of the put options for an average premium of $1.21 a-pop. Put buyers may profit if shares in Lennar Corp. fall 4.2% to breach the average breakeven price of $18.79 by expiration next month. The Miami, Florida-based homebuilder is slated to report fourth-quarter earnings ahead of the opening bell – and prior to January options expiration day – on January 11, 2012.

JAG – Jaguar Mining, Inc. – Shares in the gold mining company, up 6.4% at $6.32 in early-afternoon trade, standout in the sea of red dominating our scanners today. In-the-money call activity on the stock suggests at least one trader expects shares in the mining company to extend gains in the first few months of 2012. The Mar. 2012 $6.0 strike calls are most active, with upwards of 13,900 contracts having changed hands against open interest of 1,815 positions, as of 12:10 PM in New York. It appears the majority of the contracts were purchased for an average premium of $1.33 each. Call buyers may profit at March expiration if shares in JAG rally another 16.0% to top the average breakeven price of $7.33. Increased call action on Jaguar may have been motivated by traders waiting, watching and hoping for shares to rally further in the first quarter of 2012 on any sign the Company’s move to weigh strategic options yields a beneficial outcome.


Caitlin Duffy

Equity Options Analyst

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