Why Salesforce has some traders floating on cloud nine

Salesforce.com just hit an all-time high, and according to some traders, the sky is the limit for the cloud services provider's stock.

The company reports earnings after the bell on Wednesday, and the options market is implying a 4 percent move in either direction for the stock.

Mike Khouw of Optimize Advisors said traders are optimistic Salesforce will exceed expectations. "Bullish bets were definitely outpacing the bearish ones," Khouw said Tuesday on CNBC's "Fast Money."

On Tuesday, traders piled into March 110-calls, paying an average price of $7.80 for each contract. "Those are people that are betting that the 4 percent implied move is likely to be to the upside for Salesforce," Khouw said. "Which is probably explained by their 60 percent-plus EPS growth."

Factset analysts are expecting Salesforce to report earnings of 34 cents per share on $2.81 billion in revenue, compared with 23 cents per share a year ago. Shares of Salesforce have fallen on its last two earnings reports despite beating both revenue and EPS expectations. However, the stock has managed to rebound from those initial losses and is now up 14 percent year-to-date.

More than 80 percent of the S&P 500 companies have reported so far this season, with 78 percent beating on revenue estimates and 76 percent on earnings, according to Thomas Reuters I/B/E/S.

Salesforce touched new highs on Tuesday, and was up around 1 percent in the session.

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Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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