Tony Zhang Sees An Opportunity In Advance Auto Parts

On CNBC's "Options Action," Tony Zhang said a recent pullback of around 10% in Advance Auto Parts, Inc. AAP is an opportunity. He expects auto repair and maintenance stocks to benefit as the average age of U.S. vehicles starts to reach its records of about 12 years.

Advanced Auto Parts has underperformed the market significantly over the last five years, but two months ago it started to break out on an absolute and relative basis. Zhang sees this as a sign of strength and he sees some upside potential for the stock. He expects Advance Auto Parts to trade to $210 or even higher in the next few months.

To make a bullish bet, Zhang wants to sell the July $190/$180 put spread for a credit of $3.70. The trade breaks even at $186.30 or 3.35% below the current stock price. If the stock drops to $180 or lower, it would reach its maximal loss of $6.30.