An options strategy on Oracle ahead of earnings that generates income

Published Fri, Jun 7 202410:40 AM EDT

As AI investors potentially look to book profits and rotate out of the "Magnificent Seven," I want to look at the battered-n-bruised software sector as an opportunity to buy an outperforming, standout name. Oracle (ORCL) , one of the top three largest U.S. based software companies, report earnings next week on June 11. I want to utilize an options strategy to create income and capitalize on ORCL moving higher. Dislocation and dispersion have been themes all year for stock investors and the technology sector has led that movement. Per YCharts, the S & P Semiconductors and Semiconductor Equipment index has soared 57% this year, while the S & P Software and Services index is up just 2.2%. Clearly, software has lagged and questions about where and how companies use their capital expenditure have dealt software the short straw. That being said, Oracle has outperformed the S & P and I believe its continued growth in its cloud services should keep the bullish momentum in this $340B software giant. ORCL .SPX YTD mountain Oracle vs. the S & P 500 YTD Technically, Oracle is revealing strength as it sits above both its 50-day and 200-day moving averages. However, it is not showing any signs of being overbought with a Relative Strength (RSI) reading of just 58. (Typically, a RSI reading above 70 reveals overbought territory). Oracle's 52-week and all-time high is $132, a level that has the ability to be retested in Q3. In the event it is not, I am happy to add to my position and own more Oracle at a lower price for the longer term. The ORCL Bullish Trade Sold the $120 out-of-the-money put (8/16/24) for $4.50 Bought the $125 call (8/16/24) for $6.00 Sold the $130 call (8/16/24) for $4.00 This is a credit spread where an individual will collect $2.50 per one lot In the event Oracle goes lower between now and expiration, an investor will own the stock at $117.50 ($120 minus the premium of $2.50 that collected on the entire spread). In the event the stock closes above $130 and tests its all-time highs before Labor Day, the upside call spread will fill out and an investor looks to make another $5.00 per one call spread that they own. Stay nimble. DISCLOSURES: (Long Oracle and this options spread) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.