New bull market in software stocks hinges on this report

• Software stock options trading shows bullish sentiment with more calls than puts being purchased, signaling trader confidence in sector recovery
• Salesforce options traders are pricing in a 7.8% move post-earnings, more than double the average 3-4% realized move from the past four earnings reports
• One trader spent $650,000 on short-term call options betting on a nearly 10% upward move in Salesforce by Friday, with 61% of premium traded around calls and over 10,600 calls bought versus 4,100 puts

Summary

Key Development: Options traders signal the end of the "SaaS-pocalypse," with software sector sentiment turning bullish ahead of Salesforce (CRM) earnings due Wednesday after market close.

Critical Figures

• Software stocks (measured by IGV ETF) up 25%+ since April lows, meeting the technical definition of a new bull market
• Salesforce down 50%+ from all-time highs reached 18+ months ago
• Current CRM price: $178.60

Options Market Activity

• Call options significantly outnumber puts in software ETF (IGV)
• Salesforce alone saw more options volume than the entire IGV ETF on Tuesday
• Total premium in CRM was nearly 3x that of IGV, with 61% in call contracts
• Over 10,600 calls bought versus 4,100 puts
• Implied volatility suggests 7.8% post-earnings move—more than double the average of the past four reports

Notable Trade: One trader spent $650,000 on 2,000 call contracts at the $195 strike (expiring Friday), betting on a nearly 10% upside move.

Market Implications: Salesforce's earnings are viewed as pivotal for the broader software sector recovery. The company's outsized influence, combined with concentrated bullish options positioning, suggests traders expect strong results that could validate the nascent bull market in software stocks. However, the elevated implied volatility indicates heightened risk and uncertainty around the outcome.

The Wednesday earnings report could determine whether software stocks continue their momentum or face renewed pressure.