Oracle's stock price has fallen 17% this year, more than halving from its 52-week high. However, the options market is still betting on significant volatility following the company's earnings report after the US market closes on Thursday. Current option prices suggest a potential price swing of around 11%, slightly higher than the average of 9.5% following earnings releases over the past three quarters. Oracle's 35% surge on the day of its earnings release in September 2025 remains fresh in the market's memory.
Notably, Oracle call option trading was unusually active ahead of the earnings release, with significantly more open contracts than put options, and call option premiums were also significantly higher than put options with the same strike distance. This suggests that investors are willing to pay a higher cost to bet on a price increase, while the cost of downside protection is relatively low, contrary to the usual stock market phenomenon where "downside protection is more expensive."
This phenomenon may reflect market optimism regarding Oracle's earnings report. The company's stock price rose approximately 15% last week, and past earnings releases have often resulted in significant gains, making investors worried about missing out on potential price movements. Furthermore, the stock price's continued rebound since hitting a 52-week low in July also indicates an improved market outlook for the company.
The strong performances of Microsoft and Amazon during this earnings season have further boosted market confidence in the return on AI investments. This has made investors more optimistic about the returns on Oracle's massive AI infrastructure investments. However, the real test for Oracle lies in whether the company can continue to fund its massive AI infrastructure investments without further deteriorating its financial situation.
(The above views are from a report by Julia Spina, Head of North American Research at IG, dated September 10th, and are for reference only.)
