On the surface, technology-fueled real-estate marketplace Zillow (Z, ZG) represents a difficult proposition. Thanks to the broader challenges of the current economic paradigm — and exacerbated by President Donald Trump’s aggressive trade policies — many consumers have been struggling to make ends meet. As such, it’s not a great moment to extend oneself financially. Still, Z stock’s underlying market demand structures suggest a possible near-term sentiment reversal may be on the way.

Adding to the contrarian excitement toward the housing specialist are aberrant trades in the derivatives market. Z stock represented one of the top names in Barchart’s list of unusual stock options volume on Monday, with 9,328 contracts traded. This figure represented a 47.41% lift over the trailing one-month average volume. Further, call volume of 7,337 contracts greatly exceeded put volume of 1,991 contracts.

Of course, unusual options can only tell us so much and one needs to be careful about reading too much into the details. At the same time, heightened activity in the derivatives space can be a sign of an expectation of a big move — which is exactly what might happen when Zillow releases its first-quarter earnings report.

I’m not about to guess what may materialize in the report. It’s reasonable to say, though, that if the market perceives some optimism in the numbers or how future projections are portrayed, Z stock could move in a hurry.

What makes the matter even more enticing is the actual market demand for Zillow stock. At the end of the day, investors will either be a net buyer of a security or they will not be; there are no half-demand states of existence. Therefore, by studying demand not as price fluctuations but as behavioral transitions, we can potentially gauge their forward probabilities.

Using the Numbers Game to Smartly Speculate on Z Stock

Over the last few weeks, I’ve been diving into probabilistic analyses of the equities market to extract alpha — with fairly solid results. For example, in one of my more recent trading ideas, I stated that Trade Desk (TTD) could be a strong candidate for a bull call spread, specifically the 55/57 spread expiring May 16. So far, TTD is responding in a “predictable” manner.

What made me intrigued about Trade Desk is the same thing that attracted me to Z stock. When scanning Barchart’s unusual stock options list for high-odds trades, Zillow stood out because it had formed a distinctive pattern in its demand chart.

Over the past 10 weeks, Z stock printed a “3-7” sequence: three weeks of upside interspersed with seven weeks of downside, with a downward trajectory across the period. What makes this sequence distinct is that when it appears, there is a 62.79% chance that the following week’s performance (which coincides with this week) will see a positive gain.

Notably, the risk-reward profile is asymmetrically favorable to the bullish speculator as well, with the median return under the positive pathway clocking in at 5.1%. On the flipside, the median loss under the negative pathway lands at 3.14%.

But why care so much about the 3-7 sequence? First of all, it’s an empirical, falsifiable claim. It’s also a discrete event, meaning that a 3-7 sequence today can be stacked against prior 3-7 sequences, thus forming the basis for the aforementioned probabilistic analysis. Such a methodology would be impossible with a subjective claim like analyzing “head-and-shoulder” patterns.

Second and more importantly, the baseline one-week-long success ratio of Z stock is only 50.15%, just barely an edge for the bullish speculator. In other words, 50/50 represents the normal course of business when trading Zillow stock.

What I’m showing you here? I’m saying that this is a hot deck, where the odds — on a relative basis — dramatically favor the bettor.

How to Play Zillow Aggressively but Rationally

Primarily, the most aggressive trade available this week arguably is the 69/71 bull call spread expiring this Friday. This trade involves buying the $69 call and simultaneously selling the $71 call, for a net debit paid of $95. Should Z stock rise through the short strike price at expiration, the maximum reward is $105, or a payout of 110.53%.

This trade is priced as such because the breakeven stands at $69.95, or almost 3% above Monday’s close. However, the idea is that with the median projected return of 5.1% following the flashing of the 3-7 sequence, the 69/71 bull spread is more rational than market makers may believe.

For another aggressive approach that adds more time on the clock, you may consider the 70/73 bull spread expiring May 30. This trade requires a net debit of $137. Should Z stock hit the short strike price at expiration, the maximum reward is $163, a payout of nearly 119%.