Oracle (ORCL) selling puts for limited downside

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LEAPS options volume in Oracle Corp. (NASDAQ: ORCL ) suggests at least one investor could be betting on limited downside in the software developer. The longer-dated options action calls for ORCL to hit a floor below its 52-week low.

During afternoon trading, roughly 4,500 out-of-the-money ( OTM ) January 2012 17.5 puts changed hands for an average price of $1.64 per contract. Current open interest in this line is 256 contracts. The options action on the tape suggests investors sold these LEAPS options and collected a total of $738,000 for the lot on a bet that ORCL shares will be trading higher than $15.86 at January 2012 options expiration. If the stock is trading higher than the breakeven price but below the strike price, the investor gives back some of the premium collected. Maximum gain on this short put trade occurs if ORCL shares are trading higher than the strike price. If ORCL shares are trading below the breakeven price, the investor will suffer significant but limited losses in direct relation to the stock's movement toward zero. ORCL shares climbed 15 cents to $23.24 on Thursday. The company did not announce any news today, and the market does not expect that company's next earnings announcement until the beginning of September.




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.



This article appears in: Investing , Options

Referenced Stocks: ORCL , OTM

Karla Yeh

Karla Yeh

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