Software Stocks Bull Market Thesis Rides on Salesforce Earnings

CNBC reported Wednesday that options traders have grown sharply more bullish on software stocks this month, with the sustainability of that optimism likely depending on how markets respond to Salesforce’s after-the-bell earnings report.

Options Markets Flash a Clear Bullish Signal

The shift in sentiment is visible in derivatives activity on the iShares Expanded Tech-Software Sector ETF, known by its ticker IGV. On Tuesday alone, call contracts outnumbered puts by more than two-to-one, with buyers overwhelmingly driving that skew. The contrast with semiconductors was stark. The VanEck Semiconductor ETF saw roughly five times more puts than calls traded on the same day.

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Salesforce Dominates Positioning Ahead of Results

Salesforce drew even heavier options volume than the entire software ETF on Tuesday. According to SpotGamma data cited by CNBC, total premium exchanged in Salesforce contracts ran nearly three times the IGV figure. Around 61% of that premium flowed into call positions. Buyers snapped up more than 10,600 calls against just over 4,100 puts. One particularly aggressive trader spent $650,000 purchasing 2,000 call contracts at the 195-strike price expiring this Friday, positioning for roughly a 10% upside move before the weekend.

A Sector Still Climbing From a Deep Hole

The backdrop to all this activity is a prolonged drought for software valuations. The IGV and its components, including Salesforce itself, have been rebuilding from a punishing multi-year drawdown. Salesforce shares remain more than 50% below their all-time high reached over 18 months ago. The recent recovery, a move of more than 25% off April lows, meets the conventional definition of a new bull market for the sector. That threshold has fueled talk that the so-called “SaaS-pocalypse,” a prolonged period of multiple compression and revenue growth deceleration across cloud software names, may finally be in the rearview mirror.

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What Happens After the Bell

The options market is not complacent about the risk around Wednesday’s print. Cboe LiveVol data shows implied volatility pricing in a swing of roughly 7.8% for Salesforce shares post-earnings. That would be more than double the average realized move following each of the last four quarterly reports. Many of the largest trades by dollar volume were concentrated in the June 18 expiry, suggesting some traders are hedging against a delayed market reaction rather than just the overnight move. The session after Salesforce reports could set the tone for software broadly through the summer.

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