Zillow(Z) Elliot Wave Completion and Short Put
Updated
Zillow took a massive dump over the last few weeks falling over 45% at its most and is currently still down 40% from its highs. It also completed all 5 legs of its downwards Elliot wave and is looking to reverse. Due to the increased volatility, its options premiums are pretty high right now too leading to our 2 main trade ideas.
1. Accumulate Shares around $125 for at least 140 and 155.
2. Naked Puts (56 Days out expiring 5/21): Short the 80 put for $1.10 which has a 89.5% POP and requires $800 BPE for a decent 13% ROC. For a more aggressive and bullish play, short the 90 put for $2.20 which has a 82.5% POP and requires $900 BPE for a better 24% ROC.
With the 200 SMA support and also considering the 2SD move that Zillow has had over the last few weeks, it is highly unlikely (90% prob.) that Zillow will break below $80 within the next 56 days. If it does, it should be a great place to accumulate given the current stable fundamentals as it will be down over 60% from the highs.
1. Accumulate Shares around $125 for at least 140 and 155.
2. Naked Puts (56 Days out expiring 5/21): Short the 80 put for $1.10 which has a 89.5% POP and requires $800 BPE for a decent 13% ROC. For a more aggressive and bullish play, short the 90 put for $2.20 which has a 82.5% POP and requires $900 BPE for a better 24% ROC.
With the 200 SMA support and also considering the 2SD move that Zillow has had over the last few weeks, it is highly unlikely (90% prob.) that Zillow will break below $80 within the next 56 days. If it does, it should be a great place to accumulate given the current stable fundamentals as it will be down over 60% from the highs.
Note
1. 140 Reached.2. The 80 strike CSP is trading for $0.35 resulting in a $0.75 or 68% profit per contract. The 90 strike CSP is trading for $0.75 resulting in a $1.45 or 66% profit per contract.
Trade active
Close CSP for $0.6 resulting in a $0.5 profit per contract
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