Salesforce last reported earnings on May 24th and sold off 5 percent.  The stock continued to sell of until reach a bottom of $36.75 on June 20th.  Despite reporting in line earnings, investors sought a downward revision in guidance to reflect slow revenue growth.  However, this was not the case; the company revised guidance upwards with CEO Marc Benioff citing 29 percent revenue growth from one year prior.  In the case of Salesforce, this last point is especially interesting.

While profitable companies’ shares are usually valued based on earnings multiples, Salesforce does does not currently fit into this category.  This is partly due to their subscription model (SaaS, or ‘software as a service’), which does not allow all revenue that has been collected to be immediately recognized.  For this reason, Wall Street investors have a tendency of looking at Salesforce share values as a multiple of revenue (currently trading at around 7x expected sales for the current fiscal year).

Another challenge Salesforce may be slowing growth in stock shares.  Shares rose by roughly 116 percent (2009), 76 percent (2010), and 63 percent (2012), posting a loss of 25 percent in 2011.  Such growth make compensation tied to stock attractive to employees, but this may not be the case much longer.

As we discussed in yesterdays earnings trade for GES, catalyst events (like today’s earnings call) are often separate from the overall trend.  CRM has recently changed the manner i which it bills its customers, allowing to collect more cash from customers upfront and increase their billings.

The stock has risen on earnings 3 of the past 4 quarters, and 5 of the past 8, moving 6.7 percent on average.  The near-term at-the-money straddle is implying a move of just below 8 percent. Shares have shown strong support recently, and the trade below offers a good return on one’s money. 

Our Trade:  Buy the CRM Weekly 45.5 – 46.5 Call Spread for around $0.30.

Risk: $30 Per 1 Lot
Reward: $70 per 1 Lot
Break-even: $45.80

Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.

We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.

We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.

Traders don’t need Doc’s DeLorean to construct a profitable earnings trade setup going into this afternoon’s report.  GES has traded in a 52-week range of $22.38 – $34.36 (Aug 3.).  Since shares posted a high close of $34.16 on August 2nd, the stock has declined over 20 percent, pulling back in 12 of 18 subsequent sessions.  Up $0.50 as we move into the second half of today’s sessions, GES is up 9.5 percent on the year, underperforming the broader market and outperforming the average hedge fund.

When playing an event like today’s earnings calls, traders might choose to largely ignore the bearish chart in choosing an outlook for the catalyst movement.  The stock has moved higher on 3 of the past  4 earnings calls, and 5 of the past 8.  Consensus analyst estimates for today’s report show a $0.36 EPS on $622.87 million of revenue.  The company beat earnings last quarter and the stock rallied eight percent.  There are concerns as to back-to-school spending (historically a significant revenue source for GUESS?) in light of the changing spending habits of the American consumer, and this could be reflected in any guidance given on today’s call.

We believe the stock is prepared to rally.

Our Trade: Buy the GES Sep 28-31 Call Spread for $0.90
Risk: $90 per 1 Lot
Reward: $210 per 1 Lot
Break-even: $28.90

Greeks:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

We like this trade because it offers a decent reward:risk setup (2.3:1) and with the stock trading near $28, it is well aligned with the $3 movement the option market is implying.

We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.

We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.

Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .

Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.