Shares of database software company Oracle (ORCL) are up nearly 30 percent in the past month following the stock market’s strong rebound. One trader sees a short-term pullback ahead.
That’s based on the December 2 $75 puts. With 17 days until expiration, 2,565 contracts traded compared to a prior open interest of 129, for a 20-fold rise in volume on the trade. The buyer of the puts paid $1.02 to make the bearish bet.
Shares recently traded for just over $77, so the stock would need to fall about $2, or just under 3 percent, for the options to move in-the-money.
The company is one worth owning for the long haul, but after its substantial run higher, shares look poised to pull back.
Action to take: Investors should look for a pullback to under $70 before accumulating more shares. Oracle pays a modest dividend, which in the low $70 range would equal about 1.8 percent.
For traders, the December 2 puts could deliver mid-double-digit returns or better in the few short days before expiration. Shares rebounded strongly from their lows in the past month, and have started to trend lower in the next few days.
As with any options trade in today’s volatile markets, look to take a quick profit on a down day, rather than try to hold out for the best possible price.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.