Benzinga | May 31, 2021 11:03AM EDT

Tony Zhang's Teladoc Health Trade

On CNBC's "Options Action," Tony Zhang said we have a fairly rare opportunity to purchase Teladoc Health Inc (NYSE:TDOC) at a substantially lower valuation than what we have seen over the past year. The chart looks ugly as the stock declined around 60% in the last three months. Teladoc has recently managed to break out above its 21-day moving average and that is the first signal that perhaps the downtrend is coming to an end, said Zhang.

He wants to use a call diagonal strategy to get a long exposure. Specifically, he wants to buy the October $155 call for $18 and sell the June $170 call for $2.30. The total cost for the trade would be $15.70 or 10.42% of the closing price on Friday. Zhang's goal is to sell more calls through the July, August and September expiration to collect more premium to offset the cost of these relatively expensive October calls.