Someone Just Made a Killing in this Software Stock: Options Recap


Someone made a killing in a cloud-software company. Just look at the options.

Call volume spiked yesterday in Workday (WDAY), which shot to a new all-time high on Tuesday and is up 23 percent in the last month. It looks like the investor rang the register on a winning trade and extended their position longer into the future:

  • A block of 12,423 January 110 calls was sold for a whopping $43.93.
  • A matching number of March 140 calls was bought at the same time for $23.18.
  • They collected a net credit of $20.75 per share, or $25.8 million in total.

Remember calls fix the price where a security can be purchased, so they can make money when a stock appreciates. The investor apparently bought the calls when WDAY was lower and profited from the recent rally. Now he or she adjusted the position to recover some of their capital while also remaining exposed to further gains. See our Knowledge Center for more.

WDAY has benefited from Corporate America’s mass-exodus to “the cloud” — an amorphous collection of services running more efficiently on third-party platforms. In the case of WDAY, their service is outsourced human resources.

The company has beaten quarterly earnings estimates several times in the last year. Its recent sprint higher seemed to follow a gush of enthusiasm toward companies like Autodesk (ADSK) and Splunk (SPLK).

WDAY’s next quarterly report is due after the close on September 4. Tuesday’s call roll will protect the investor from a potentially weak set of numbers because it lowers their net “delta” from 1.17 million to 869,000. Click here for clear instructions on making sense of greek words like “delta,” “gamma” and “theta.”

Workday (WDAY) chart with moving averages and options volume.
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.