You can see the report dates in the Oracle (NYSE:) chart below. They’re the big gaps on tremendous relative volume. Following these gaps, the stock has tended to run in a consolidation range until the next report. Ahead of Thursday night’s report, the stock has held true to this pattern, moving in about a $2.50 range as the 200-day SMA rises up to meet it.
Momentum is building with the RSI up at 60 and the MACD crossed up and rising. And in the short term, the price has built a small symmetrical triangle into earnings. There is support lower at 49.40 and 48 then a gap to 46.40 and 44.40. There is resistance above at 51.25 and 52.80. The reaction to the last 6 earnings reports has been a move of about 5.72% on average or $2.90, making for an expected range of 47.90 to 53.20.
The at-the money December Straddles suggest a smaller $2.50 move by Expiry, with Implied Volatility at 108% above the January, at 25%. Short interest is low at 1.0%. Open interest is biggest at the 47 and 50 strikes on the Put side. On the Call side it is much bigger at 53 and 55 with some size as well at 50 and 51.
Four Ways To Trade Oracle
- Trade Idea 1: Buy the December 50/48.5 1×2 Put Spread for 7 cents.
- Trade Idea 2: Buy the December 51/53 Call Spread ($0.65) and sell the December 48.5 Put for 10 cents.
- Trade Idea 3: Buy the December/January 55 Call Calendar ($0.15) and sell the December 47 Put for a 10 cent credit.
- Trade Idea 4: Sell the December 47/53 Strangle for a $0.55 credit.
#1 gives the downside, with leverage and a possible entry at 48.50. #2 and #3 give the upside, using leverage and may put you in the stock at 48.5 (#2) or 47 (#3). #4 is profitable on a close from 46.45 to 53.55 at Expiry. I prefer #1 or #3, but #4 for a 1% return on the stock overnight is not bad.
I hold January 52.50 calls from earlier this fall.