Buy Alert: August 30, 2013

Marcus Haber | August 30, 2013

Buy Alert: August 30, 2013

Trade Details

Buy Zillow (Z) October 2013 $75 Puts for $1.70 or better

Why?

Z, an online real estate information marketplace, is an interesting stock. Sometimes it trades like a housing stock. Other times it trades like an internet stock. Either way, it’s been an amazingly hot stock this year – up 244% year to date to be exact.

Typically, I don’t like to bet against a stock that’s a favorite of short sellers. And, 18% of Zillow’s float is short – a substantial amount. The problem you can run into is of course, the short squeeze. Not to mention, Z is a rapidly growing company.

However, the latest parabolic move in the stock now has the shares trading above all three major moving averages. Basically, the shares have now reached absurd territory. And, that sort of move can’t hold –particularly if the overall market sells off. If the market turns, speculative stocks like this often get hit the hardest.

Let’s buy October puts in Z in anticipation of the share price coming back down to earth.