Salesforce.com Inc.’s stock CRM, -0.78% rose 0.2% in afternoon trading Tuesday, and was one of just four of 30 Dow Jones Industrial Average DJIA, -1.76% components gaining ground, ahead of the customer-relationship-management software company’s fiscal fourth-quarter results due out after the closing bell.
An options strategy known as a straddle is priced for a one-day post-earnings price move of $18.42 in either direction on Wednesday, or about a 36% bigger move than the average move over the past 12 quarters of $13.50, according to data provided by Option Research & Technology Services (ORATS) Principal Matt Amberson. A straddle is a pure volatility play — not directional — that involves the simultaneous purchase of bullish (calls) and bearish (puts) at-the-month options that expire at the end of the week. Based on the current stock price of $210.85, straddle buyers wouldn’t start making money unless the stock rises above $229.27 on Wednesday or falls below $192.43. The company has beat profit and revenue estimates for at least the past 20 quarters, according to FactSet, but the stock has gained the day after those earnings reports just 10 times. The stock has slumped 16.2% over the past three months, while the S&P 500 SPX, -1.55% has shed 5.0%.