While the pandemic lockdowns are all but over, at least one trader expects shares of Zoom Communications (ZM) to regain some of their recent decline.
That’s based on the September $290 calls. Nearly 6,300 contracts traded against a prior open interest of 114, for a 55-fold jump in volume. The trade has 126 days to play out, and with shares right near $290, it’s an at-the-money trade.
The buyer of the call paid about $36.15 to make the trade. With an at-the-money trade, the option should move dollar-for-dollar with a move higher in shares, less any declining time premium. Shares of Zoom have shed nearly half their all-time high peak of $588 per share.
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Even with that decline, shares are still up nearly 80 percent over the past year, beating out the overall market average. Revenue and earnings are likewise up triple-digits in that time.
Action to take: This rebound trade makes some sense. While shares are at 6-month lows, they’re also heavily oversold, suggesting a mild relief rally could be in the cards in coming weeks. An at-the-money call option trade is likely to see a profit and avoid a loss rather than an out-of-the-money call option trade here.
This is one pricey option trade, but even a modest move higher could lead to a reasonable profit in the coming weeks.
Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.