Weekend Trader Alert
August 28, 2022
Open Positions Update
- Please extend the scheduled time-stop date on the Ford (F) January 20, 2023, 13-strike call to Monday, September 12.
The following is this week's recommendation:
Oracle (ORCL)Place a limit order to buy the Oracle (ORCL) November 18, 2022 80-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, August 26, this option was offered at $7.45. ORCL closed at $74.65 on Friday, August 26.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, September 26, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Oracle (ORCL) flashed a bear flag with a bearish engulfing candle on Friday, shortly after failing at its 200-day moving average, and breaking below its 20-day moving average. Since rallying roughly 20% off its June lows, ORCL's rebound lost steam near its -10% year-to-date breakeven level, which is now pushing the stock lower. Drilling down, there's peak put open interest at the 80-strike which has capped the share price, and is also double Oracle stock's March 2020 low. Plus, the shares are breaking down below the year-to-date anchored volume weighted average price (AVWAP), which has been highly damaging to the stock's price this year.
A round of bear notes could push ORCL even deeper into the red. Of the 17 in coverage, seven consider the stock a "buy" or better. Plus, the 12-month consensus price target of $88.88 is a 19% premium to Friday's close, which is notable in an environment where businesses are conserving cash.
Speculating on more downside for ORCL with puts could be a prudent play. The security's Schaeffer's Volatility Index (SVI) of 37% sits higher than just 30% of readings from the past year. This implies options traders are pricing in relatively low volatility expectations at the moment. What's more, the stock boasts a Schaeffer's Volatility Scorecard (SVS) of 75 out of a possible 100. This means ORCL has tended to outperform these volatility expectations of late.
Finally, our recommended November 80 put has a leverage ratio of -6.82, and will double in a 12.55% drop in the underlying equity, which would be a retest of recent lows, with no breakdown needed.
Most Recent Recommendations
The information contained herein is intended solely for the individual subscribers, is not intended for institutional investment organizations, and is not legal to be rebroadcast. Please click here for full disclaimer details.
Limitation on Schaeffer's Investment Research (SIR) liability: SIR liability, whether in contract, tort, negligence, or otherwise, shall be limited in the aggregate to direct and actual damages not to exceed the fees received by SIR from Subscriber. SIR will not be liable for consequential, incidental, punitive, special, exemplary or indirect damages resulting directly or indirectly from the use of or reliance upon any material provided by SIR. Without limitation, SIR shall not be responsible or liable for any loss or damages related to, either directly or indirectly, (1) any decline in market value or loss of any investment; (2) a subscriber's inability to use or any delay in accessing SIR website or any other source of material provided by SIR; (3) any absence of material on SIR website; (4) SIR failure to deliver or delay in delivering any material or (5) any kind of error in transmission of material. SIR and Subscriber acknowledge that, without limitation, the above-enumerated conditions cannot be the probable result of any breach of any agreement between SIR and Subscriber.