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Traders betting on Oracle, this retailer ahead of earnings next week

Key Points
  • Heavy options activity in Oracle December 51 calls, according to trader Jon Najarian.
  • Options traders are also betting that retailer Costco moves higher on earnings.
  • Investitute founder Pete Najarian scored winning trades on Wells Fargo and Macy's in the past week.

Oracle and Costco are set to release earnings next Thursday after the bell, and investors are making big bets ahead of those reports.

In the past week traders have bought more than 12,000 Costco calls at the December 180 strike price, and more than 11,000 at the 185 strike price, according to Jon Najarian, Najarian Family Office co-founder and "Halftime Report" contributor. As of Thursday's close the stock was trading at $186.20, so these are in-the-money calls since the price of the stock is higher than the call strike price.

Ron Antonelli | Bloomberg | Getty Images

These calls are typically less risky than out-of-the-money calls, which means they are also usually more expensive. So in order for the trader to make a profit the stock will have to make a significant move to the upside.

As of Thursday's close, the stock is up 7.9% since November 28 when traders started buying these particular calls. As the stock price has appreciated so, too, has the value of the calls. On November 28th the December 185s were trading at $0.40. By Thursday they shot up to $4.60. The December 180 calls have gone from just over $1 to $8.25 in the same timeframe. These calls expire next Friday.

Oracle is also set to report earnings next Thursday after the bell, and while traders are bullish on the stock ahead of the report, they're not anticipating a monster gain.

Getty Images

Over the past week more than 3,500 calls at the December 51 strike price have been bought. But more than one thousand calls at the December 53 strike price have been sold, so while the the options activity indicates a bullish view, many traders aren't expecting the stock to far surpass $53.

As of Thursday's close the stock was trading at $48.52, so it would have to gain at least another 9.2% to top $53. These Oracle calls expire next Friday.

The Najarians track the options market as a way to spot buying opportunities that might go unnoticed: heavy volume can sometimes indicate the market's expectation for upcoming equity moves.

This week Pete Najarian, Investitute co-founder, has used options to make money in Macy's and Wells Fargo.

Bulls say this retail stock is heading higher

Last Thursday bulls piled into Macy's, buying more than 20,000 calls at the December 25 strike price. Through Thursday the stock is up 5.4% since Najarian's call on the "Halftime Report."

Bulls bank with Wells Fargo

Wells Fargo is another trade that worked for Najarian this week. On Tuesday he bought calls at the February 60 strike price, and the stock is up more than 3.4% in the two days since.