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Why Oracle is seeing heavy put action

One investor is warming up to Oracle following a disastrous earnings report last week.

optionMONSTER's tracking programs detected the sale of about 5,000 February 26 puts for $1.44 and the purchase of an equal number of February 24 puts for $0.61, resulting in a credit of $0.83. Volume was below open interest in the 24s, so there are two possible explanations for the activity.

One is that an existing short position in the puts was rolled to the higher strike. The other is that a new put credit spread was opened, with the lower-strike contracts serving as a hedge.

Both strategies reflect a belief that downside is limited in the near term, and a hope that ADBE will nudge above $26 by expiration. If that happens, the November 26s will expire worthless and the trader will keep the credit. (See our Education section)

Oracle is down 1 percent to $25.37 today and has fallen 15 percent in the last month. Most of that drop occurred on Dec. 21 after quarterly earnings and revenue missed expectations for the first time in years.

Despite the bad news, ORCL remained above its October lows, which could be leading some chart watchers to believe that it doesn't have much further to fall.

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

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


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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