Software giant Oracle (ORCL) has been rangebound for nearly one year. But with the Nasdaq near all-time highs, Oracle stock is back above all of its moving averages and less than 7% off its all-time high ahead of the company’s earnings report Tuesday.

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The Nasdaq composite surged 2% in higher volume Wednesday, helping lift chip giant Broadcom (AVGO) to a 6.1% gain in higher volume. Broadcom is still trying to clear the 1,400 level and isn’t far from its all-time high of 1,445.40 with earnings due Wednesday after the close.

Adobe (ADBE), meanwhile, has been on a sharp downtrend since February. Big sellers hit the stock hard on Feb. 16, when Microsoft (MSFT)-backed OpenAI unveiled Sora, a competing text-to-video generator. In the first half of last year, Adobe introduced AI-powered, text-based video editing. Results from Adobe are due Thursday after the close.

Oracle Stock In Rally Mode

Sentiment has soured a bit in the enterprise software sector after earnings sell-offs for Salesforce (CRM), ServiceNow (NOW), Shopify (SHOP) and Workday (WDAY).

Oracle stock gapped up sharply March 12 after the company reported earnings and revenue growth that accelerated from the prior quarter. Adjusted profit increased 16% to $1.41 a share. Revenue increased 7% to $13.3 billion. The results were mostly in line with expectations. So was guidance for the May-ended quarter.

The bright spot was in Oracle’s cloud services and license support segment, which delivered revenue of $9.96 billion, up 12% year over year and slightly ahead of expectations. Inside the cloud services segment, cloud revenue jumped 25% to $5.1 billion. Oracle cited strong demand for its artificial intelligence servers.

Previously, Oracle set a goal of $65 billion in annual revenue by fiscal 2026. On the earnings conference call, CEO Safra Catz said the goal might be conservative given the company’s momentum.

Results for Oracle’s fiscal fourth quarter ended in May are due Tuesday after the close. The FactSet consensus is for adjusted profit to fall 13% to $1.15 a share, with revenue up 6% to $14.6 billion.

Watching Broadcom

Leading chip designer Broadcom barely budged Thursday after a 6.2% gain Wednesday.

Results for the April-ended quarter are expected to show earnings down 18% to $7.66 a share. But revenue growth is expected to accelerate, up 38% to $12.1 billion.

The stock fell hard March 8 despite news that quarterly revenue jumped 34% to nearly $12 billion. The big jump in revenue was a result of the company’s $69 billion buy of VMware, which closed in November. The acquisition will help Broadcom customers modernize their cloud environments.

Earnings and revenue topped expectations in March, but investors were disappointed that Broadcom didn’t raise its full-year revenue guidance. Semiconductor products made up 62% of Broadcom’s total revenue in the quarter. Infrastructure software revenue more than doubled to $4.57 billion.

“Strong demand for our networking products in AI data centers, as well as custom AI accelerators from hyperscalers, are driving growth in our semiconductor segment,” CEO Hok Tan said in the earnings release.

Last month, Broadcom unveiled new low-power networking and switching products to help resolve bottlenecks in data centers running AI applications.

Options Trading Strategy

A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here’s how the option trading strategy works, and what a call-option trade recently looked like for Oracle.

First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Further, others already might have broken out and are getting support at their 10-week lines for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.

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A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.

Once you’ve identified a bullish setup in the earnings calendar, check strike prices with your online trading platform, or at cboe.com. Also, make sure the option is liquid, with a relatively tight spread between the bid and ask.

Look for a strike price just above the underlying stock price — that’s out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.

Choose an expiration date that fits your risk objective. But keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.

Oracle Stock Option Trade

When Oracle stock traded around 123.75, an out-of-the-money weekly call option with a 124 strike price and a June 14 expiration came with a premium of around $4.75 per contract. That was 3.8% of the underlying stock price at the time.

One contract gave the holder the right to buy 100 shares of Oracle at 124 per share. The most that could be lost was $475 — the amount paid for the 100-share contract. To break even, Oracle would need to rise to 128.75, factoring in the premium paid.

The expected move in the options market for Oracle stock, based on the at-the-money strike price of 123, was about 9 points up or down. Investors find that projected move by adding the at-the-money call premium and the put premium for the June 14 contract.

Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.

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