Salesforce.com is pushing to new highs, and one investor is
using a ratio spread to leverage a continued run.
optionMONSTER's Heat Seeker tracking system detected the purchase
of 13,000 August 85 calls for $5. Seconds later, 26,000 August 100
calls were sold for $1.05. Volume was more than six times open
interest in both strikes.
CRM rose 0.74 percent to $80.51 yesterday and is up 18 percent in
the last three months. The provider of cloud-based enterprise
software reported better-than-expected results on Feb. 24 and
raised its full-year guidance.
The stock has been rallying higher and last month found support at
the same $75 level that had been resistance in June 2008 and again
in January 2010. Some chart watchers may interpret that pattern as
evidence that the bullish trend will continue.
Yesterday's option strategy is designed to earn a bigger return
from the move than would be possible with a simpler vertical call
spread. Selling twice as many upside contracts allowed the investor
to earn more premium and reduce the cost basis to $2.90 per call
The trader stands to earn a maximum profit of 417 percent if CRM
closes at $100 on expiration. However, the gains will erode above
that level and turn to losses if the stock rallies past $115.
Overall option volume in the name was 13 times greater than
average. Calls accounted for a bullish 94 percent of the activity.
(Chart courtesy of tradeMONSTER)
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