First Week of December 19th Options Trading For Zscaler (ZS)

For Zscaler Inc. (ZS), currently priced at $297.00, options strategies present distinct risk/reward profiles. Selling a $290.00 strike put for a $17.95 premium offers a potential cost basis of $272.05 if assigned, or a 6.19% (35.84% annualized) return if it expires worthless, with 60% probability. Concurrently, a covered call using a $310.00 strike call for $18.75 premium, combined with buying ZS at $297.00, could yield a 10.69% total return if called away by December 19th, or a 6.31% (36.55% annualized) premium gain if it expires worthless, with 53% probability. Implied volatilities for these options are 48% and 50%, respectively, compared to ZS's 39% trailing 12-month volatility.

Analysis

The article details two distinct options strategies for Zscaler Inc. (ZS), currently trading at $297.00, leveraging out-of-the-money put and call options to generate yield or define entry/exit points. These strategies capitalize on ZS's current valuation and implied volatility.

A sell-to-open $290.00 strike put, with a bid of $17.95, offers a potential cost basis of $272.05 if assigned. This strike is approximately 2% out-of-the-money and has a 60% probability of expiring worthless, yielding a 6.19% return (35.84% annualized) on the cash commitment.

Conversely, a covered call strategy involves purchasing ZS shares at $297.00 and selling a $310.00 strike call for $18.75. This targets a 10.69% total return if the stock is called away by the December 19th expiration. The $310.00 strike, about 4% out-of-the-money, has a 53% chance of expiring worthless, providing a 6.31% (36.55% annualized) premium boost.

Implied volatilities for these options (48% for puts, 50% for calls) are notably higher than ZS's 39% trailing 12-month actual volatility. This suggests the market anticipates increased future price movements for ZS, impacting the risk-reward dynamics of these options plays.

Key Decisions for Investors

• For investors interested in ZS at a lower entry point, consider selling the $290.00 strike put to potentially acquire shares at an effective $272.05 cost basis or collect a 6.19% premium if the option expires worthless.
• For existing ZS shareholders seeking to enhance yield, evaluate the covered call strategy using the $310.00 strike, which could generate a 10.69% return if shares are called away or a 6.31% premium if the option expires worthless.
• Monitor ZS's implied versus historical volatility, as the current higher implied volatility suggests increased expected price swings, which could affect option pricing and strategy outcomes.