Options traders are signaling renewed optimism in software stocks, with particular focus on Salesforce's upcoming earnings report, which is expected to be a pivotal event for the sector [1]. The iShares Expanded Tech-Software Sector ETF (IGV) has seen increasingly bullish options activity throughout May, highlighted by Tuesday's trading session where call options outnumbered puts by more than two to one, indicating a strong bias toward further gains [1]. In contrast, the VanEck Semiconductor ETF (SMH) experienced a bearish tilt, with five times more puts than calls traded [1].
Salesforce, a leading cloud company, has seen its stock price decline by over 50% from its all-time highs more than 18 months ago. However, the broader software group has rebounded, rising more than 25% since its April low, which meets the technical criteria for a new bull market [1]. Salesforce's earnings are seen as a potential catalyst for further gains or a reversal, given the company's outsized influence on the sector [1].
On Tuesday, options trading in Salesforce was particularly robust, with more contracts traded in Salesforce than in the entire IGV ETF. The total premium exchanged in Salesforce options was nearly three times higher than IGV, with 61% of the premium concentrated in call contracts, according to SpotGamma data [1]. Over 10,600 call options were bought compared to just over 4,100 puts, reflecting strong bullish sentiment [1].
Implied volatility suggests traders are bracing for a significant move in Salesforce shares, with options pricing in a 7.8% swing—more than double the average realized move following the last four earnings reports, based on Cboe LiveVol data [1]. Notably, one trader spent $650,000 on 2,000 call options with a $195 strike price expiring Friday, betting on an almost exactly 10% move into the weekend [1].
CONCLUSION
Options market activity indicates high expectations for Salesforce's earnings to drive further gains in software stocks, potentially confirming a new bull market for the sector. The outcome of Salesforce's report is likely to have a significant impact on sentiment and direction for software equities in the near term.