Enterprise software specialist Workday (WDAY) is set to report its quarterly earnings this Thursday following the closing bell. Based on implied volatility (IV) trends, it’s quite obvious that interest in the company’s results is sky-high. Still, I’m not going to pretend that I have any special insights regarding the business — it really doesn’t matter.

Instead, retail investors should focus their attention on two metrics surrounding WDAY stock: unusual options activity and market breadth. Both suggest that Workday could offer a pleasant surprise for optimistic speculators.

Options Market Signals Elevated Intrigue for WDAY Stock

As mentioned above, IV — the market’s expectation of future price fluctuations — shot significantly higher for the options chain expiring May 23. Specifically, the ratio hit 93.66%, a far cry from the historical volatility of 39.39%. Essentially, market makers are pricing in more than double the expected price fluctuation relative to the usual trend. That’s not at all unusual given the upcoming earnings disclosure.

Not surprisingly, WDAY stock also triggered Barchart’s screener for unusual stock options volume. On Monday, total options volume reached 5,540 contracts, representing a 120.1% lift over the trailing one-month average. Interestingly, the put/call volume ratio skewed to the high side at 1.48, which seemingly carried bearish implications.

Still, a closer look at options flow — which focuses exclusively on big block transactions likely placed by institutional investors — provided a more nuanced context. Net trade sentiment among high-dollar transactions reached $279,100, thus favoring the bulls. Subsequently, most of the aforementioned put contracts were credit-based (sold) puts, which have neutral to slightly bullish implications.

To be fair, the smart money is not immune to mistakes. However, such players won’t last long on Wall Street if they continue to make poor decisions. Combined with the reality that professional traders have access to information and resources that regular retail investors lack, following the implications of smart money flows can be prudent at times.

Focusing on the Core Driver of Probabilities

Despite the compelling narrative that Workday’s unusual options activity provides, the interpretations of sentiment, flow data and other metrics only go so far. Ultimately, extracting alpha through trading mechanisms such as options isn’t about stories — it’s about probabilities.

Frankly, the smartest traders don’t bet based on emotions or intuition. Instead, they’re calculating the odds of specific outcomes materializing and acting accordingly. This is where WDAY stock presents both a challenge and an opportunity.

On any given week, Workday effectively symbolizes a coin flip. The chance that a long position in WDAY stock will be profitable is only 50.45%. For context, a blue chip will typically feature odds of 51% to 52%, which still isn’t much to write home about.

But from a market breadth perspective, WDAY stock in the past 10 weeks has printed a 7-3-U sequence: seven weeks of upward movement, three weeks of declines, with a net positive trajectory across the period. This sequence has materialized 79 times in the past decade. In those cases, the following week’s price action swung higher 60.76% of the time, with a median return of 2.4%.

By deduction, WDAY stock could reach $279.76 by the end of this week — and possibly even higher if Workday is able to deliver encouraging results.

Fundamentally, then, the odds have shifted dramatically in the better’s favor. Again, under normal circumstances, a one-week wager in WDAY stock is a 50/50 proposition. Thanks to the appearance of the 7-3-U sequence, though, the proposition is basically 60/40.

Setting Up a Bullish Strategy

What does this all translate to? Wall Street is now giving you 10 percentage points of free odds. While options trading will always involve risk, betting on WDAY has now become much more favorable.

For those who want to take a shot, the 275/280 bull call spread expiring this Friday may be enticing. This transaction involves buying the $275 call and simultaneously selling the $280 call, for a net debit paid of $260. Should WDAY stock rise through the short strike price at expiration, the maximum reward is $240, a payout of over 92%.