DailyPlay – Opening Trade (ZTS) – November 23, 2022

ZTS Bullish Opening Trade

View ZTS Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 6 Contracts Dec. 16th $150/$160 Call Vertical Spreads @ $2.87 Debit.

Total Risk: his trade has a max risk of $1,722 (6 Contracts x $287).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a neutral to bullish trend.

1M/6M Trends: Bullish/Neutral

Technical Score: 3/10

OptionsPlay Score: 100

Entering the Trade

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

Please note these prices are based on the previous day’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

Stocks moved well-higher on Tuesday as the pre-holiday slowdown has already started. Less than 19 billion shares traded so far this week, the quietest two-day period in all of 2022. Though dollar and rate weakness might have helped fuel yesterday’s gains, Goldman Sachs was out with a note stating that they expect that next year’s close will be at SPX 4000 – essentially unchanged from exactly where that benchmark index is now trading.

American pet and livestock drug manufacturer Zoetis (ZTS) is the largest of its kind in the world. I’m interested in the long side of the name, because the weekly chart posted a -13/-9 bottom shortly before this year’s low was made, with subsequent price action to those signals halting right at the Risk level for the -13 (i.e., $132.87), with this year’s lowest weekly close at $133.67).

ZTS – Weekly

Then, when I look at its daily chart, I see a -13 count made last Friday that even without that signal makes me think there’s shortly going to be a move higher up to test its TDST Line at $161.69. Thus, let’s look to buy the ZTS Dec. 16th $150/$160 call spread. Yesterday, it closed at $2.875 mid, which is about 29% of the strike differential and generally in line with what I’m willing to pay for a slight OTM call spread.