We are now more dependent on technology than ever and the rate of tech adoption is remarkable. Oracle Corporation (NYSE:ORCL) is a main provider of tech infrastructure, so the company fundamentals support upside potential in ORCL stock over the long-term.
Technically speaking, Oracle stock may have its challenges off a disappointing reaction to earnings that was made worse by a market-wide dip into geopolitical risk. But instead of waiting out for a perfect entry point, I would prefer to sell risk against clear levels of proven support.
ORCL stock is not terribly expensive. It trades at just 20 times earnings, and analyst expectations are well balanced between holds and buys. So any potential continuation of the downside move should abate sooner than later.
In anticipation of that happening, I am willing to start selling risk below perceived value levels.
How to Trade ORCL Stock Here
The bet: Sell the ORCL Jan 2018 $37/$35 credit put spread. This is a bullish trade with a 90% theoretical chance of success to yield 15% on money risked. This trade is designed to be boring; it has a 16% buffer from current price.
For those who are willing and able to own Oracle stock at $37, I can modify this trade to be more aggressive and yield a bigger absolute reward.
The alternate: Sell ORCL Jan 2018 $37 put naked and collect $1 per contract. Here, I need shares to stay above $37 or I will be put the stock. Then anything below $36 would accrue losses for me.
Normally, I like to balance my trades by selling opposing risk, but in the case of ORCL stock, I will opt out of doing so for now. Given the size of the buffer and the macro equity thesis, I am confident I can manage the short-term price drops against my bullish risk un-hedged.
Learn options as easy as 1-2-3 here. Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.
