Options traders are signaling growing confidence that the long slump in software stocks may be ending, but Salesforce’s earnings report on Wednesday will be a key test of that view. Trading in the iShares Expanded Tech-Software Sector ETF (IGV) has turned increasingly bullish in recent sessions, with call buying dominating on Tuesday, while the VanEck Semiconductor ETF (SMH) saw far more puts than calls. That contrast suggests investors are rotating toward software after a difficult stretch for the sector.
Salesforce is central to that trade. The stock is still down more than 50% from its all-time high reached over 18 months ago, but it has rebounded more than 25% from its April low, which technically places it in a new bull market. Because of its size and influence, Salesforce’s post-earnings reaction could shape sentiment across the broader software group.
Options activity in Salesforce was especially intense on Tuesday. More contracts traded in Salesforce alone than in the entire IGV ETF, and the total premium exchanged was nearly three times higher. According to SpotGamma data, 61% of the premium was in call options, with more than 10,600 calls bought versus just over 4,100 puts. That shows traders were positioning for upside rather than protection.
Market pricing also reflects expectations for a major move. Cboe LiveVol data shows options are pricing in a 7.8% swing in Salesforce shares after earnings, which is more than double the size of the stock’s realized move after each of the past four earnings reports. In other words, traders believe this report could bring a much bigger reaction than normal.
Some of the largest trades were concentrated in the June 18 options expiry, indicating bets on a move over the coming weeks. At least one trader, however, was looking for a fast breakout. That trader spent $650,000 to buy 2,000 of the 195-strike calls expiring Friday, a position that would benefit if Salesforce rises by nearly 10% before the weekend.
The broader message from the options market is that investors may be warming back up to enterprise software after months of weakness. But the strength of that conviction now depends on Salesforce delivering a result that justifies the aggressive bullish positioning. If the earnings reaction disappoints, it could quickly temper the optimism that software’s worst stretch is already behind it.
