Shares of Zillow (Z), the real estate aggregation website has been a top winner in the past few years. One trader sees the potential for a bear market in shares.
That’s based on the January 2023 $80 puts. With over 680 days until expiration, over 15,000 contracts traded against a prior open interest of 226, a 66-fold jump in volume. At a current price near $125, shares would need to shed nearly one-third for this option to move in-the-money.
The trader paid about $16 for each contract on average.
- This Industry is Exploding Faster Than It Has in 15 Years
1,700 people are moving to Central Florida every week.
And the numbers are only increasing as more and more people are banking the end of the pandemic drawing near.
And one company, which just received critical approval to list on a prestigious public exchange, could be on the verge of going on a huge run.
Shares of Zillow hit a low of $20 during last year’s market meltdown, only to rise 10-fold at its peak of just over $200 in February. The current drop to the $125 range already puts shares into a bear market, which could reverse as tech and software stocks look to recover from oversold levels.
Action to take: Zillow’s overall valuation has gone from $7.5 billion to nearly $40 billion today, even with shares well off their peak. That seems difficult to justify, as does the stock’s forward earnings of 180—assuming it even makes a profit.
With tech shares showing signs of weakness, and potentially continuing to slide until the Nasdaq hits its 200-day moving average (even while being oversold in the short-term), this is a reasonable hedge trade. It’s also a play on a potential slowdown in red-hot real estate. And, by going out until 2023, it’s a cheap hedge that could pay off for traders a long time down the line.