ORCL Analysis

Oracle Corp. (ORCL)

Update 12/15/2017: ORCL’s earnings of $0.70 per share beat analysts’ consensus estimate of $0.69 by 1.1%. Shares dropped about $5 in after-hours trading, rising only slightly the next day after the opening bell. I exited for a loss.

Shares fell by 4.7% over my holding period of less than a day, or a -1,724% annual rate. The options position produced a 9.9% loss for a -3,622% annual rate.

As I entered the trade ORCL had a neutral (3) Zacks rank with an earnings surprise predictor (ESP) of -0.42%. Shares were showing a weak bull trend, with an average directional index (ADX) of 17.5 and a DI gap (+DI minus -DI) of 10.31. The ADX stood in the 11th percentile of its recent range.

ORCL’s fall from the pre-earns closing bell to the end of the first session of the announcement was $1.89, within the $2.33 average of the last four earnings announcements, the $3.33 central tendency and the $4.05 maximum.

The expected price move, with 85% accuracy, of $2.33 was eclipsed by a decline that, at its maximum, was down $3.19. The movement broke was close to being contained by the $3.14 profit zone to the downside, breaking below it by 5 cents.

ORCL publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Dec. 22.

Implied volatility stands at 29%, which is 2.9 times the VIX, a measure of the volatility of the S&P 500 index.

ORCL’s IV stands in the 96th percentile of its annual range and most recent broad movement.

The price used for analysis was $50.25.

I shall use a direction-neutral iron fly structure for the position.

Premium: $2.36 Expire OTM
ORCL-iron fly Strike Odds Delta
Long 54.00 86.3% 15
Break-even 52.86 79.0% 23
Short 50.50 53.9% 49
Short 50.50 46.0% 51
Break-even 47.36 78.0% 20
Long 45.00 93.0% 6

The premium is 52.4% of the width of the position’s wings.

The risk/reward ratio is 1.3:1.

The zone of profit in the proposed trade covers a $2.36 move to the upside and $3.14 to the downside. The biggest immediate move after each of the past four earnings announcements was $4.05, and the average was $3.12. After eliminating the maximum and minimum post-earnings movements, the central tendency is $3.33.

The expected move covering 85% of occurrences is $2.33, or 3 cents within the profit zone to the upside and 81 cents to the downside..

The bid/ask spread is 2.22%.

Decision for My Account

I have entered a position on ORCL as described above. Technically, it’s the best of hte positions I entered today. Practically, we see on the morning after. The stock at the time of entry was priced at $50.28.

By Tim Bovee, Portland, Oregon, Dec. 14, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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