Zillow, Inc. (Z) Options Hot Amid M&A Buzz

Zillow Inc (Z) reportedly got FTC approval to merge with Trulia Inc (TRLA)

Jan 23, 2015 at 1:53 PM
facebook X logo linkedin


Online real estate concern Zillow Inc (NASDAQ:Z) is back in triple-digit territory for the first time in a week, up 11.6% at $109.25. Shareholders are applauding reports that the Federal Trade Commission (FTC) is backing the company's deal to scoop up Trulia Inc (NYSE:TRLA), and options traders are rolling the dice on more upside for Z.

Intraday call activity is running at 10 times the average pace, and has outpaced put volume by a margin of nearly 3-to-1. The stock's 30-day at-the-money implied volatility has jumped 3.2% to 59.1%, pointing to a growing appetite for short-term bets.

Among the most active options is the March 120 call, which speculators are buying to open to bet on a move north of $120 by the close on Friday, March 20, when the back-month options expire. In light of Z's surge, delta on the call has jumped to 0.36 from 0.19 at yesterday's close, implying about a 36% shot of expiring in the money.

Today's affinity for short-term calls is nothing new for Z, though. The equity's Schaeffer's put/call open interest ratio (SOIR) is docked at an annual low of 0.66, suggesting near-term traders haven't been more call-skewed in the past year. Likewise, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 1.33 registers in the 77th percentile of its annual range, pointing to accelerated call buying over put buying of late.

However, considering 46.3% of Z's float is sold short, some of those calls -- especially at out-of-the-money strikes -- could be attributable to short sellers looking for a hedge. Should any shorts hit the exits in the wake of today's news and subsequent jump, Z could enjoy additional tailwinds. At the equity's average pace of trading, it would take 13 sessions to buy back these bearish bets.

Technically speaking, Zillow Inc (NASDAQ:Z) is now in positive year-to-date territory, up 2.8%. What's more, the equity is on pace to end north of its 80-day moving average -- which has stifled rally attempts over the past few months -- for the first time since early September.

Daily Chart of Z since August 2014 with 80-Day Moving Average
 

Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.


Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!

 

 
 
 


 
 

Rainmaker Ads CGI