MarketMoodz
Mike Khouw Admits Error on Zscaler; Cuts Losses, Revises Trade
Options Action host Mike Khouw acknowledged his Zscaler (ZS) thesis was wrong after the stock’s post-earnings move and said he cut the position to preserve capital. The trade — a July 165/185/220 call spread risk reversal placed for a modest credit — flipped against him after Zscaler’s fiscal‑2027 guidance, leadership departures and a market rotation weighed on the name.
Key Takeaways
- Khouw conceded his Zscaler thesis failed after the stock’s post‑earnings move and he closed the position to limit losses.
- Zscaler guided fiscal 2027 revenue to roughly 16.5% growth, below consensus and investor expectations.
- Two senior sales leaders departed around the same period, raising questions about near‑term growth durability.
- The options trade was a July 165/185/220 call spread risk reversal taken for a modest credit and has lost about $35 as ZS fell ~$59.
- The stock slipped back below its 50‑day moving average, triggering Khouw’s risk‑management stop to preserve capital.
People Involved
- Mike KhouwOptions Action host, trader
- Jim CramerCNBC host/commentator (context)
Entities Involved
- Zscaler (ZS)Cloud security company; the stock at the center of the trade
- CNBC / Options ActionMedia platform where Khouw discussed the trade and his reassessment
- Semiconductor sectorMacro rotation destination that pulled flows away from momentum names like ZS
MarketMoodz Analysis
For investors, the episode is a compact lesson in why fundamentals and technicals must align — and why risk controls win when they don't. Khouw’s thesis flipped bullish after ZS cleared its 50‑day moving average and he saw improving fundamentals. That thesis unraveled when Zscaler guided fiscal 2027 revenue to roughly 16.5% growth, below consensus, and disclosed departures of two senior sales leaders; together those items undercut growth visibility and investor confidence. The position — a July 165/185/220 call spread risk reversal taken for a modest credit — lost about $35 as the stock slid roughly $59 and fell back below the 50‑day, prompting an immediate cut to preserve capital.
This isn’t an outlier. Momentum names have repeatedly been vulnerable to macro rotations and guidance misses. The recent rotation into semiconductors and away from high‑multiple momentum stocks amplified downside pressure on ZS. For options traders, the trade highlights practical controls: scale positions, define stop levels tied to technicals (Khouw used the 50‑day moving average), size for the worst reasonable outcome, and accept small, defined losses when the market disproves your thesis.
What to watch next: Zscaler’s forward guidance revisions, any announcements about replacing the departed sales leaders, and whether ZS can reclaim the 50‑day moving average on volume. Options traders should monitor implied volatility and time decay — a modest‑credit risk reversal can turn costly fast when direction moves against you — and consider hedges or position structure adjustments rather than doubling down. The clean takeaway: preserve capital first; better setups will come.
Source: Original Article