Unusual Options Activity: Salesforce.com (CRM)

Shares of cloud provider Salesforce.com (CRM) jumped higher on Thursday following solid earnings and a bullish full-year outlook. One trader sees the possibility for a move higher in the coming weeks.

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  • That’s based on the October 29 $280 calls. With 35 days until expiration, over 2,200 contracts traded, a 22-fold rise in volume from the prior open interest of 101 contracts. The buyer of the calls paid $4.98 to make the trade.

    The recent rally in shares brings the stock up 9 percent over the past year, sizably lagging the S&P 500 index. Over a longer timeframe however, the software giant has been a major grower, with shares up more than tenfold.

    Action to take: Shares are conventionally expensive, at about 80 times forward earnings. However, growth has generally been rapid at the company, a trend likely to continue. Given the high earnings, profitability is a little on the low side for a tech company, but shares can likely continue their market-beating growth in time. Investors may like shares, but don’t expect a dividend for some time.

    For shorter-term trades, the October calls can potentially deliver mid-to-high double-digit returns in the next few weeks. Traders may want to look further out as well, for opportunities to play a longer-term uptrend in the stock.

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    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.