Bullish strategy on Salesforce.com

By
A A A

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 Chart 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 owned.

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)



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: CRM

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

Stocks

Referenced

67%

Most Active by Volume

48,099,947
  • $16.09 ▲ 0.50%
40,277,806
  • $102.50 ▲ 0.24%
40,236,499
  • $19.57 ▲ 2.35%
31,092,510
  • $49.75 ▲ 0.65%
30,795,218
  • $34.92 ▲ 0.78%
29,910,855
  • $3.63 ▲ 0.83%
24,019,154
  • $13.06 ▼ 0.38%
23,753,906
  • $74.82 ▲ 1.31%
As of 8/29/2014, 04:04 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com