Call buying has been hot on ZTS, but call writers have focused on the October 125 call
Zoetis Inc (NYSE:ZTS) has been on a brilliant run higher this year, up 46% in 2019 and touching an all-time high of $130.08 on Sept. 9. Following a brief pullback, options traders have been betting on another run higher, with call buying ramping up at the
International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The animal health concern has a 10-day call/put volume of 8.14 across these exchanges, which ranks in the 90th annual percentile.
Data suggests these bulls may be on to something. Zoetis just popped up in a study done by Schaeffer's Senior Quantitative Analyst Rocky White, which shows the shares have historically outperformed when coming within a standard deviation of their 40-day moving average, like they are now. ZTS has averaged a 21-day gain of 4.9% following the prior 10 signals of this type.
On the surface, it would seem that a similar rally would benefit those holding the front-month October 125 call. However, data actually shows heavy sell-to-open activity here, so many were actually betting for ZTS to hold below $125 below the close on Friday, Oct. 18, when the contracts expire.
Based on our Schaeffer's Volatility Index (SVI) of 19%, with an annual percentile rank of 17, it would look like a good time to buy premium on ZTS. Those considering going long on the veterinary expert should note that 50% of analysts in coverage have just "hold" ratings in place, so there's room for upgrades to come through and provide tailwinds.