2 Cloud Giants Set to Join the NDX This Month

Call activity is ramping up for both equities as a result

Deputy Editor
Dec 13, 2021 at 10:15 AM
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The Nasdaq-100 Index's (NDX) annual rebalance was recently announced, and the large-cap growth index is set to see some notable additions to its ranks beginning Monday, Dec. 20. Specifically, six stocks will make their way onto the NDX, replacing the likes of Fox (FOXA), Check Point (CHKP), and Trip.com (TCOM). Two such names are cloud computing stocks Datadog Inc (NASDAQ:DDOG) and Zscaler Inc (NASDAQ:ZS), both of which are getting a bump following the news. 

DDOG was last seen up 3.3% to trade at $180.55, just under a month removed from its Nov. 17 all-time high of $199.67. The security once again has support from the 50-day moving average, which put pressure on the shares earlier this month after guiding them higher for much of 2021. Year-to-date, Datadog stock is now up around 80%. 

Call trading in DDOG's normally quiet options pits is ramping up following the announcement. In the first half hour of trading, 1,686 calls have crossed the tape, which is 1.5 times the intraday average. However, the most popular contract is the weekly 12/23 170-stike put, where new positions are being opened.

ZS, meanwhile, was last seen up 4.1% to trade at $318.30, also around a month out from its Nov. 19 peak of $376.11. The equity has been barreling up the charts since hitting annual lows in mid-May. In fact, the security added 47% over the past six months, while the 140-day trendline caught a major pullback on Dec. 6. Longer term, Zscaler stock is up 68.1% year-over-year.

Zscaler stock is also seeing an uptick in bullish activity in response to the news. So far, 2,017 calls have exchanged hands -- double the intraday average and nearly four times the amount of puts traded. The most popular positions are the December 310 and 330 calls.

There's plenty of short interest to be unwound on both equities. DDOG's 11 million shares sold short account for 4.7% of the stock's available float, while ZS' 7.57 million shares sold short represent a significant 9.2% of its available float. In other words, these bearish bets account for four days of pent-up buying power at each securities' average daily pace of trading, leaving room for additional wind at their backs, should these shorts break for the exits.      

 

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