A pair of technology companies are suddenly on fire in the U.S. options market.
International Business Machines (IBM) and Slack Technologies (WORK) and have both set records in the options market over the last few sessions. The surging activity is yet another example of interest in technology stocks — especially cloud-based software firms.
IBM started moving on January 22 when quarterly results beat estimates. Even more important was growth in newer, subscription services. That made Wall Street start to think 108-year old company is finally evolving past mainframes and entering the 21st century.
Options volumes picked up, but it was just getting started. A week later, cloud-computing boss Arvind Krishna replaced Ginni Rometty as CEO. That further convinced the skeptics and lit a fire of bullishness in the stock. IBM went on to have its best week in over a year, and its highest options volume in at least a decade.
IBM’s activity was dominated by calls, which fix the price where investors can buy a stock. They’re typically associated with bullish sentiment.
Record Call Volume in Slack
Like IBM, WORK had been struggling. Things changed suddenly yesterday when Business Insider highlighted IBM’s reliance on the company.
WORK ripped 15 percent on the story, its biggest gain ever. Options volume also surged past 250,000 contracts, including 173,000 calls. Both numbers were records.
Management soon downplayed the article because IBM is a long-standing customer. That caused WORK to surrender about half its gains in the postmarket.
Still, the rallies show the strength of this bull market in technology. Some stocks like Advanced Micro Devices (AMD), Tesla (TSLA) and Apple (AAPL) have flown to new highs thanks to their growth stories. But perhaps even more interesting is the recent trend of investors targeting once-forgotten stocks.
After all, IBM is a potential value stock after years of investor neglect. It trades for 11 times forward earnings and less than 2 times revenue. Compare that with 30 and 11 times, respectively for Microsoft (MSFT). Even with a lower growth rate than the parent of Windows and Office, investors can’t ignore IBM the way they once did.
WORK is in a similar category. Like Uber Technologies (UBER), Pinterest (PINS) and Zoom Video Communications (ZM), it struggled after going public last year. But like those others, WORK is coming to life as Wall Street gains faith in its business.
In other words, just when the bears thought they had a victory, the bulls snatch it away. These stories demonstrate why technology, growth stocks and the Nasdaq continue to drive this market higher.