Salesforce Has Record Day as Option Interest Surges Following on Blowout Quarter

It’s been a banner week for Salesforce.com, Inc (NYSE: CRM) as the company was just added to the Dow Jones Industrial Average and its earnings report showed a strong rebound from Q1. As businesses seek out way to engage customers during a pandemic, it placed CRM in a great position. Now the only concern is its impact on the price-weighted index like the Dow as the share price is surging.

Salesforce had its best day ever as the company’s Q2 EPS surged over 118%. The $1.44 per share earnings beat analyst estimates by over double. In addition to the EPS beat, the company saw a 29% increase in revenue year-over-year.

The large move puts the Dow Jones Industrial Average in an interesting position as a price-weighted index. The stock going from around $200 to $270 has caused the stock to significantly increase its weighting in the index just as its being added.

As the price was surging on Wednesday, the option market was seeing a surge in volume as well as option volume finished over three times the average. A contract that was especially active with call option buyers was the 25 SEP 20 $260 calls that finished with over 20,000 contracts traded against an open interest 55.
Action to Take: While the option contract traded is in-the-money, the indication is that the price may continue its bullish movement in the coming days to weeks.

Speculators may want to consider buying the 25 SEP 20 270/275 long call vertical for $2.50 or less.