Despite recent turbulence, investors largely haven't lost sight of how lucrative the tech trade has been in 2020, and even though Oracle has underperformed the broader tech space, the legacy software stock is still up nearly 10% this year.
While that may not be an eye-popping performance, even in the context of a market that has dealt with unprecedented challenges throughout the year, it is important to remember that Oracle is trading very close to its all-time highs, which it reached in July. Options traders are now looking at the stock as a catch-up play, and betting that Thursday afternoon's earnings report could catapult Oracle to brand new highs.
"Oracle traded more than two times [more] calls over puts today, although the volume was about average," Optimize Advisors CIO Michael Khouw said Wednesday on CNBC's "Fast Money." "That's not surprising, given that they report after the close [Thursday], so we may see more volume tomorrow. Right now, the options market is implying a move of about 5.6%" in either direction.
That implied move would be just about in line with the company's average post-earnings move, but Wednesday's most-active contract actually breaks even significantly higher to the upside of that range, and roughly 2% higher than the company's previous all-time high.
"Included in that are the October 60-calls," said Khouw, "We saw those trading for about $1.30, and buyers of those calls are betting that the stock is going to be up at least 7.5% by October expiration."
Of course, also buried in the popularity of these calls is speculation surrounding the company's reported interest in acquiring TikTok's U.S. operations. October expiration falls after the deadline set for TikTok to either be sold or discontinue operations in the U.S., meaning that these calls capture two potentially major catalysts for the stock.
Oracle was trading about 1.2% higher on Thursday afternoon.