Ride share company Uber (UBER) is down about 5 percent over the past year. One trader sees a further move higher for shares in the coming months.
That’s based on the August $42.50 calls. With 108 days until expiration, 3,540 contracts traded compared to a prior open interest of 108, for a 32-fold rise in volume on the trade. The buyer of the calls paid $0.28 to make the bullish bet.
Shares recently went for about $30, so they’d need to rise about $12.50, or about 41 percent, for the option to move in-the-money.
That’s a big move for shares, and would exceed the stock’s 52-week high of $37.58. Such a move may be extreme, but we could see some move higher as Uber next reports earnings tomorrow, May 2.
Earnings slid by one-third last year, but revenues rose by nearly 50 percent for the industry leader in ride-sharing services.
Action to take: Shares look oversold going into earnings tomorrow, and may see some rise higher. That could be good for a short-term boost in shares.
For traders, the August $42.50 calls may not move in-the-money, but they have plenty of time to move in the right direction. And given the low cost of the calls, they could easily deliver mid-to-high double-digit returns in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.