Shares of real estate analytics company Zillow Group (Z) are down nearly 53 percent in the past year, thanks to the company’s decision to try and buy and flip homes in a number of markets. One trader sees the selloff as over.
That’s based on the June $75 calls. With 164 days until expiration, 5,000 contracts traded compared to an open interest of 310, for a 16-fold rise in volume. The buyer of the calls paid $4.48 to make the trade.
Shares last traded near $60, so shares would need to rise $15, or 25 percent, for the option to move in-the-money.
The stock bottomed out in November, and appears to be starting to move higher. An improved earnings outlook has also sent shares from 150 times forward earnings to 50 times forward earnings.
Action to take: The company seems to have learned its lesson about flipping homes. While the company took a big loss in 2021, revenue did rise nearly 165 percent in the past year, and a strong real estate market should bode well for shares from here.
For traders, the June calls should allow for mid-to-high double-digit profits in the next few months. Traders should look for a jump higher as a chance to book profits quickly.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.