How Zscaler Options Traders Tripled Their Money Before Selloff

Investors exited their positions before Zscaler's C-suite shakeup

Fernanda Horner

Digital Content Manager

Oct 12, 2022 at 3:21 PM

Subscribers to our Schaeffer's Weekly Options Countdown service scored a 210% profit with our recommended Zscaler Inc (NASDAQ:ZS) October 7, 2022 162.50-strike call in less than one week. Now seems like a good time to share our reasoning for initiating this long position.

When we made our recommendation on Sunday, October 2, the security had broken out of bull flag pattern and above the 20-day moving average. ZS had also found support at the -50% year-to-date level and the 160-strike peak put mark, the latter of which showed overhead calls expiring at 170, giving the stock room to run.

At the time, short interest also made up over 8% of the stock’s available float and had been surging, indicating shorts could cut positions in a bullish ascent. Put trading was also prevalent, per the security’s 10-day put/call volume ratio of 1.46, which sat in the 76th annual percentile at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

ZS 20 Day

The security did run higher, as we had predicted, breaking above the 180 call strike. Our recommended targeted gain of 200% also had subscribers exiting their positions just before ZS took a turn lower, following news President Amit Sinha resigned to become CEO of a privately held tech firm. At last check, the security is down 1% at $147.24, below the aforementioned 20-day trendline and trading at its lowest level since Sept. 7.

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