Unusual Options Activity: Uber (UBER)

In-the-money call buying suggests upside.

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  • March 2020 $25 call options on Uber (UBER) saw over 2,500 contracts trade, a 13-fold increase in volume from the previous open interest of 192. With shares around $26.50, the option is about $1.50 in-the-money, and should move dollar-for-dollar higher with shares in the next 134 days before expiration, less the time premium.

    The buying comes after the company reported good earnings—but that it also burned through substantial cash—sending shares to post-IPO lows.

    An in-the-money bet is more expensive than out-of-the-money, but it also is a conservative options trade that already has some value to it, and is likely to retain that value. There’s still a lot of leverage too: Should shares go to their old high of $47, the $35 option would be worth $12, nearly triple the current price.

    Action to take: Wait for now on any Uber trade, both on the shares and on the options. Besides reporting earnings this week, the company just getting into its IPO lockup period expiring. There may be more selling pressure as insiders start to sell their shares, to take advantage of the fact that the company is now public. That could mean shares may stay low for a while, even if the company continues to do well operationally. Even an in-the-money option can suffer if the share price declines further, so look for an opportunity should shares drop a further 10-15 percent in the coming weeks.

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