DailyPlay – Opening Trade (ZM) – December 19, 2023

ZM Bearish Opening Trade Signal

View ZM Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Jan 26th $72/$77 Call Vertical Spreads @ $1.63 Credit per contract.

Total Risk: This trade has a max risk of $2,022 (6 Contracts x $337) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $337 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is currently bullish but trading at resistance..

1M/6M Trends: Bullish/Bullish

Relative Strength: 7/10

OptionsPlay Score: 94

Stop Loss: @ $3.26 Debit. (100% loss to the value of premium received)

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

As equities continue to rally into overbought territory, we look to balance our DailyPlay portfolio with a bearish position. As such, we are looking into Zoom Video Communications (ZM). ZM is underperforming relative to the market and has reached a multi-month area of resistance at $74, as recently, its price action has shown multiple rejections of that level. Price has therefore been rangebound since March, indicating that a pullback is likely. Risk/reward favors the downside, so we will use this opportunity to collect a premium by playing a bearish Credit Spread.

We will look to Sell the Jan 26th $72/$77 Call Vertical @ $1.63 Credit. With a hypothetical portfolio of $100,000, we recommend risking 2% of the portfolio’s value to this trade, which is 6 Contracts for a risk of $2,022. We will set a stop loss on the put spread at around 100% loss to the value of the premium received @ $3.26 Debit. 

ZM – Daily