Unusual Options Activity: Uber (UBER)

 

Bet on shares to move higher by spring.

The March 2020 $34.00 call options on Uber (UBER) saw over 10,100 contracts trade against a prior open interest of 391, a 35-fold surge in volume. The bet, with shares trading around $31, indicates that shares should move at least 9.6 percent higher in the next 176 days before the option expires.

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  • Shares of the recent IPO have traded as high as $47 per share, back in late June, about a month after going public.

    Since then, share prices have slid into the low $30 range, so the bet indicates at least some recovery in shares. As a nearly stage company, Uber is currently unprofitable, and the rideshare company stated in its IPO documents that it may never be profitable.

    Action to take: We think investors should invest elsewhere. The company’s business model makes it a difficult stock holding, particularly as shares are considered a “failure” for dropping from their IPO price, even in spite of love from analysts.

    For speculators, however, it’s a different story. Shares are oversold in the short-term and a bounce could be in the cards, especially if the company beats on its next earnings expectations. The March 2020 $34 call options are a reasonable bet on some kind of a bounce in the next few months and have plenty of time for the trade to play out.