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Options traders bet strong earnings will extend Salesforce's rally

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Options bulls flood Salesforce ahead of earnings

Options bulls are flooding into Salesforce ahead of Thursday afternoon's earnings report as the stock continues to skyrocket off its lows of the year. 

Suddenly, the cloud computing giant is up 12% on the year as it prepares to report first-quarter results, and sentiment in the options market is pointing toward even more gains on the horizon. 

"We saw calls outpace puts by about 2-to-1 in Salesforce, and the options market, right now, is implying a move of about 4.8%," Optimize Advisors CIO Michael Khouw said Wednesday on "Fast Money."

That implied move is just about right in line with the 4% post-earnings move in either direction that Salesforce has averaged over the last eight quarters, but this time around, the sentiment is leaning decidedly bullish.

"The most active options were the weekly 180-strike calls," said Khouw. "Buyers of those calls are betting that the stock is going to be above that $180 by [at least $2], so that would be suggesting that the 4.5% to 5% move the stock is implying will be to the upside."

Those calls break even at an underlying stock price of $182, which is about 3% from where Salesforce closed Wednesday's session, and with stock trading another 3% higher in Thursday's session, those contracts are right on the cusp of profitability. 

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