Options (CRM): Unusual Trading Activity

| May 10, 2012 | 0 Comments

CRM OptionsOptions in software services company (CRM) are showing larger than normal activity today.

Don’t forget, we’re still focusing on heavy activity along with upcoming earnings.

And with CRM reporting earnings next Thursday after the close, option traders are positioning for a rise in the stock price.

Let’s remember, traders must be aware that next Friday is May expiration.  So, however traders position for this company, their options expire the very next day.

In other words, there’s no room for error!

Even though the Nasdaq closed down for the past six days, option traders don’t seem to be concerned when it comes to

So, with CRM trading at $137.09, how are traders positioning for next week?

Simple… they’re buying call spreads.  Specifically the CRM May $145 – May $150 call spread.

Right out of the gate today one option trader bought 2,000 contracts of this spread.  He paid an average price of $1.85 a share or a total cost of $370,000 for the position.

Remember, a call spread is an option strategy where one call option is purchased and another is sold at a higher strike price.  This is done to reduce the upfront premium, as well as to limit risk.

What’s interesting here is that this is a very disciplined trader.  He’s not looking for a home run.

We know this by examining the details of the trade.  It’s at-the-money and it’s only a five point spread.

This limits his risk to $1.85 a share.  He only needs CRM to rise 7% on earnings and he’ll collect $3.15 a share.  A profit of $630,000.

Not bad for a one week holding period!

So, what’s behind this bullish call spread?

As most of you know, provides cloud computing and social enterprise solutions to various businesses and industries worldwide.

The company delivers customer relationship management applications through the Internet or the cloud.  And its cloud computing services enable customers to connect, engage, sell, service, and collaborate with their customers.

In addition, has spent years perfecting its hosted software model.  It has a significant lead on potential software rivals such as Oracle (ORCL) and SAP.

It all comes down to this…

I think this large call activity is due to analysts expectations for upcoming earnings and recent strength in the technology sector.

So, as we anxiously await earnings next week, let’s hope options traders are correct and CRM moves higher.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.