Why the bulls are back in Oracle

By David Russell,

Shutterstock photo

Oracle got pounded last week on worries it might get smacked by the federal government with $1 billion of legal costs, but now the bulls are coming back.

ORCL Chart optionMONSTER's Heat Seeker tracking system detected the purchase of about 10,000 January 25 calls for $0.90 and the sale of a matching number of January 19 puts for $0.72.  The trade cost $0.18 to implement and will mimic a long position in the database-software giant.

ORCL is up 0.9percent to $22.87 in morning trading, following a 7 percent drop last week amid bearishness in the technology sector. The recent selling, which was accompanied by a flurry of bearish put activity, drove the shares back to the middle of the range they've followed since late May.

The company's last earnings report on June 24 was better than expected, though revenue was only in line with forecasts. Last week's declines coincided with a Justice Department investigation into whether it overcharged the government.

Today's option trade, known as a bullish combination, will provide significant leverage to the upside if ORCL closes above $25 on expiration but will lose money below $19. The options will expire worthless of the shares remain between those two levels.

(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 Nasdaq, Inc.

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This article appears in: Investing Options
Referenced Stocks: ORCL

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