Oracle Earnings Draw Bullish Speculation in Options
By Erin Arvedlund
Staff Reporter for theStreet.com
6/14/99 1:44 PM ET
A big bet on Oracle (ORCL:Nasdaq) right off the bat in Monday's trading session gave a clue to how the market is speculating on the company's earnings Tuesday and could set the tone for the tech sector this week.
Volatility Index
Today % Change
26.90 -0.41%
Source: ILX
The Morgan Stanley Dean Witter desk had a customer buying roughly 18,000 June 25 calls in Oracle at 1 3/4 ($175), against which the customer sold 900,000 shares of the common stock, according to the head of another large institutional options desk.
Oracle shares rose 1 1/4 to 26 9/16 by midday.
"It's a defensive strategy, but it lets them maintain the bullish position ahead of earnings," he said. "There are a lot of Oracle bets on the table, and there is a huge open interest in the June strikes. This is the big trade of the day, possibly of the week." Earnings are due out after the close Tuesday.
Put/Call Ratio
Today (Noon) Previous Close
0.52 0.48
Source: ILX
Oracle's June 25 calls were up 1/2 ($50) to 2 1/8 ($212.50) on volume of 20,098 against open interest of 14,574.
Oracle is expected to report fourth-quarter earnings of 32 cents a share, up from 27 cents a year earlier, but results are expected to reflect a drop in demand for software related to the year 2000 problem and slower growth at its consulting business.
Investors have only a week left until their June options expire, and the triple-witching potential has added an uneasy feeling to trading. Triple-witching describes the simultaneous expiration of equity options, index options and index futures and occurs once a quarter.
Separately, the options trader said, customers have been piling into Oracle puts since last week.
And a large seller of Morgan Stanley Hi Tech index calls hit the market early Monday, selling 2,000 June 990 calls. "Somebody's closed out of them, and it looks like that was a bad trade for whomever was the seller since the whole trading floor is hedging themselves against the index."
The call price dropped 8 3/4 ($875) to 39 1/4 ($3,925) on volume of 2,065 against open interest of 2,761. The index was down 9 to 1,021.
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Elswhere in the technology sector, Vitesse Semiconductor (VTSS:Nasdaq) has seen consistently active trading in its options for the past week or so. July 45 puts in Vitesse dropped 1/4 ($25) to 3/8 ($37.50) on volume of 5,320 contracts vs. open interest of 5,069. The stock was up 2 1/6 to 60 3/8 on Monday. |
