Options: Oracle Call Buyers Pre-Earnings

This activity does not mean that investors should run out and buy shares.
Publish date:

By Jud Pyle, CFA, chief investment strategist for the Options News Network

Shares of


(ORCL) - Get Report

are up more than 12% to $15.6 from their 52-week low close of $13.85 on March 9. Yet despite that rally, the shares are still down more than 11% in 2009. The company is set to announce earnings after the close today, and at least one investor is expressing a bullish view, buying calls looking for a potential bump in the stock.

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Looking at the April 16 calls, we find that more than 43,000 have traded in the first four hours of trading. Open interest in these calls is 6858 according to the


report at


. What is most noteworthy about this volume is that most of the activity is on the buy side, meaning there are more buyers of these calls than sellers.

As we mentioned, this buying activity could be a bet by an investor that shares of ORCL will continue to run if the earnings announcement has positive data. The call options are currently trading for around 70 cents, with the stock near $15.7.

At that price, the buyer just needs the stock to be above $16.70 to be in the money at expiration. Given that ORCL shares closed $16.83 as recently as Feb. 19, that might be part of the reason why the investor finds these options to be attractive.

Call-buying like this does not mean that investors should run out and buy shares. But it is something that anyone who has a position in ORCL, or is thinking about a position in ORCL, long or short, should be aware of.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."