There’s reason for optimism, judging by bullish options flows around stocks that do better when interest-rates stay lower, and call-buyers who are prepared for the biggest move in Oracle since Covid.<\/p>\n
First, inflation: despite economists expecting annualized CPI to hit above 4% for the first time in three years, interest-rate sensitive sectors were the best performers on Tuesday. Bonds firmed and regional banks rallied alongside homebuilders as small-caps finished the day higher.<\/p>\n
Options trading in homebuilding ETFs XHB<\/a> and ITB<\/a> was almost entirely in calls. In ITB, traders bought 3,200 calls, compared to just 68 puts, and in XHB, calls outpaced puts almost 10-to-1. In the regional bank fund KRE, traders bought more than three times as many calls as puts.<\/p>\n One reason for optimism around interest rates could be that crude oil slipped below $86 per barrel Tuesday, the lowest since mid-April.<\/p>\n “Tomorrow’s CPI data could surprise with oil prices coming down,” Ben Emons, CIO and founder at FedWatch Advisors, said by phone. “The oil price move suggests markets are leaning a little more into the Trump jawbone, love it or hate it.”<\/p>\n Despite a renewed threat<\/a> against Iran by Trump early Wednesday, oil prices were only slightly higher.<\/p>\n Whether or not a sector rotation comes at the price of big-tech could depend on earnings after the bell from Oracle, the near $600-billion software behemoth that’s the biggest weighting in the IGV ETF<\/a> and leading the group by 15 percentage points on the year.<\/p>\n Stock Chart IconStock chart icon Oracle, YTD<\/p>\n Options traders are pricing in a 12-percent move in the stock, the biggest implied move going into an Oracle earnings since March 2020. That might be nerve-wracking, if it weren’t for the bullish bias in the company’s options flows over the past week<\/a>.<\/p>\n Twice as many calls traded versus puts in Oracle on Tuesday, with traders buying more than 27,000 calls and just under 19,000 puts. Of the $300 million in premium traded, about $220 million was tied to calls, according to SpotGamma data.<\/p>\n![\"hide](\"https:\/\/static-redesign.cnbcfm.com\/dist\/a54b41835a8b60db28c2.svg\")
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