Call toll-free 800.328.1267
[showmodule id=”58959″]
Someone’s looking for a strong earnings report from a new technology stock.
Docusign (DOCU), a provider of online contracts and e-signatures, went public in April 2018. Earnings beat estimates the first three times it reported. And, yesterday a large options trader positioned for a rally with the next set of numbers due after the closing bell on Thursday.
Unusual volume was detected in DOCU’s June 55 calls halfway through the morning. Large blocks started hitting for $1.45, followed by more buying at $1.55. The activity continued through the afternoon, pushing volume to almost 16,000 contracts.
Calls fix the price where a security can be purchased, so they tend to appreciate when shares move higher. Traders use them to manage risk, although Monday’s options face potential losses from time decay.
That’s when call or put loses extrinsic value into expiration. The process usually occurs at a smooth pace, but it can happen more dramatically around big events like quarterly results. The net result is that Monday’s call buyer needs a sharp rally just to break even.
How much? DOCU must hit at least $56.50 just to recover their principle. It closed at $50.57 yesterday, down 8.78 percent.
Monday’s selloff seemed to result from negativity toward other technology stocks. The broader weakness followed reports that major firms Alphabet (GOOGL), Facebook (FB) and Apple (AAPL) may face U.S. anti-trust actions.
It was also a noteworthy session for DOCU because total options volume spiked past 30,000 contracts for the first time ever.
In conclusion, DOCU has drifted aimlessly since last year’s IPO. Now someone’s looking for its strong earnings track record to finally translate into a rally.
Options are an important tool for many retail investors. They can either replace trading shares, or make it easier to position oneself in stocks. Let’s consider the first things options traders need to know. An Option’s Price Is Usually Called ‘Premium’ There are some...
Options are complex instruments that can swing sharply in value. Traders may find the moves confusing, so this article will help explain key "Greeks" -- some of the most important factors impacting the price of options. Greeks are Greek letters used in complicated...
Covered calls are one of the most common strategies for options traders. While many investors have heard of them, they may not realize that covered calls are highly versatile. This article will cover how the method can be bullish, neutral and even bearish. First,...