8d • General discussion
Oracle Earnings Tonight: Hidden Profits on the 3D Volatility Surface
Oracle reports after the bell today. At first glance it looks like a normal earnings event. Consensus expects $16.9B in revenue and $1.70 EPS (about 19% YoY growth). But in my personal view, the real story behind this release is AI infrastructure contracts.
Over the last year Oracle's Remaining Performance Obligations (RPO) have exploded to more than $500B; an enormous backlog tied to massive AI compute agreements. The market believes a large portion of that backlog comes from very large customers connected to the new generation of AI labs and data-center projects.
Over the last year Oracle's Remaining Performance Obligations (RPO) exploded above $500B; an enormous backlog, tied to massive AI compute agreements. The market believes a big portion of that backlog comes from very large customers connected to the new generation of AI labs and data-center projects.
So tonight the key question is how real that backlog actually is. And that difference could matter enormously for volatility. If the market starts to believe the backlog is durable and diversified, Oracle suddenly becomes one of the core AI infrastructure stocks, and if the opposite happens, the narrative weakens quickly. In other words, tonight is less about earnings and more about how investors reprice the AI story around Oracle.
The weekly options expiring this Friday imply an 9-11% move. That sounds large, but the distribution of Oracle earnings moves is strange. The last four earnings reactions were roughly: -3%, +13%, +36%, 11%. The average move is about 9%, but that average hides very fat tails, Oracle can move far more than the average suggests.
This creates a strange situation. Systematic traders who compare the implied move with the average historical move see the straddle as expensive. But traders who remember the +36% move (like Tom Sosnoff 😉) know that Oracle can explode. So the options market is currently sitting right between those two views.
Here's another unusual detail. Short-term put skew has steepened, meaning traders are paying up for downside protection, but at the same time there has been heavy call buying in longer-dated options. This tells us something interesting about sentiment. Investors are nervous about the near-term risks around the earnings event, but they still want exposure to the long-term AI upside. That combination leads to strong front-week volatility followed by sharp IV crush once the event passes.
The edge is not in predicting the direction, as Oracle could easily move 10% either way depending on how the AI backlog narrative evolves. The real opportunity sits in the volatility structure; right now the front-week volatility is inflated by the event, while longer-dated volatility remains supported by the broader AI theme.
Lower Probability Trade Idea: Pure IV Crush Calendar
For traders who want to target the earnings volatility collapse directly, there is another a very structure: a short-term call calendar spread:
Buy 150 Call - March 20 (10 DTE) for about $9.45Sell 150 Call - March 13 (3 DTE) for about $7.80Net debit: $1.55
This is a classic earnings calendar spread designed to capture the difference between front-week event volatility and post-earnings volatility.
Right now the weekly options are extremely inflated because they include the earnings announcement. Once the report is released, that volatility usually collapses within minutes.
However, the next week’s options still contain normal volatility, because they still have time value but no earnings event.
So the trade effectively sells the earnings volatility spike while keeping exposure to the calmer volatility that remains after the event.
The ideal outcome is: Oracle opens close to $150, the short weekly call collapses in value, and the longer-dated call retains much more premium. That difference is the profit.
High-Probability Trade Idea: an Earnings Jade Lizard
Instead of selling the weekly earnings premium directly, I prefer stepping slightly further out in time and structuring a Jade Lizard in April, where volatility is still elevated but not purely event-driven.
My structure (April 17 expiration, 38 DTE): Sell 130 Put @ $4.45, Sell 150 Call @ $13.40, Buy 155 Call @ $11.45; Net credit: $687 per contract; Max profit: $687; Probability of profit: 80%.
This is a classic Jade Lizard structure where the call spread width (5 points) is fully financed by the premium collected from the short put. That creates a very attractive payoff profile; if ORCL rallies after earnings, the upside risk is essentially neutralized because the credit collected offsets the call spread width.
If the stock simply stays above the 130 put, the trade benefits from theta decay and post-earnings volatility compression. And importantly, the short put sits far outside the implied move range, which gives the trade a large margin of safety.
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Oracle Earnings Tonight: Hidden Profits on the 3D Volatility Surface
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