ZS' options can be had for a bargain at the moment
While software name Zscaler Inc (NASDAQ:ZS) has taken a breather since its well-received earnings report sent it soaring to fresh highs earlier this month, there’s plenty of evidence ZS is primed for another rally. For one, ZS’ post-earnings bull gaps have often been followed by a brief pullback, plus, this most recent breather has found some support at the $96 level, which is six times the stock’s initial public offering (IPO) price.
Despite this month’s record high, there’s still plenty of holdout among the brokerage bunch, leaving ZS ripe for a round of bull notes. While 12 in coverage sport “buy” positions, 10 still say “hold,” and one says “sell.”
Short interest is still quite high as well. The 10.38 million shares sold short represent almost 15% of Zscaler’s available float, and would take almost four days to cover at the stock’s average pace of trading, which could propel it higher, should some of this pessimism start to unwind.
For those wanting to get in on ZS’ next move with options, now looks like the perfect time. The stock’s Schaeffer’s Volatility Index (SVI) of 55% is higher than just 17% of all other readings from the past year, meaning options players are pricing in relatively low volatility expectations at the moment. Adding to this, Zscaler’s Schaeffer’s Volatility Scorecard (SVS) sits at a fairly high 70, indicating that the stock has tended to exceed these expectations.
Lastly, our recommended call option has a leverage ratio of 4 and will double on a 24.8% surge in the underlying stock.
Subscribers to Schaeffer's Weekend Trader options recommendation service received this ZS commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.