How to Trade the Uber slump, with a hedge in case it rallies

NYSE:UBER Technically speaking UBER has been trading with a more positive than negative bias since its inception.

There are many risks for this company going forward and for that reason we would like to explore options trades that benefit in prices dropping. (or even rising)

I have designed this trade to benefit more from a plunge (40% or more) in UBER's underlying stock through the use of options.

There is one segment on the right side of the chart that shows a hypothetical gain if uber should drop roughly 41% from its IPO open price.

The strike prices are laid out in terms of other long put option targets as well as their intended time frame.

For the sake of this exercise we won't be quoting the exact figure because the fast changes in the options premiums, but if all of the targets are hit before or around the time of its earnings call we could see appreciation in the underlying option from 100 - 300% (estimation)

Granted this trade is slightly neutral because we are paying for any loss in the call options value if the stock does drop but what we suggest is pyramiding the position where more put options are accumulated as time passes and the earnings date approaches..

The put dates are set for July, August and September where we are getting long puts for these periods in weighted sizes:

We would keep buying 10 puts , 7 puts , 5 puts , 2 puts , 1 put at these strike prices : 40, 35, 30, 25 and when the strike prices are hit we would roll forward the put options into lower strikes with a heavier quantity- if successful a portion of the 10 puts at the 40 strike price would be liquidated and a remainder would be rolled into 35 and 30 strike prices for the following month thereby synthetically being short 1000 shares of UBER .... the more momentum in the decline would results in a greater velocity of leverage we'd have on the position (A MUCH BIGGER SHORT)

Profiting along the way

When such huge drops occur it leads to a lot of competition among buyers, and our concern is that there will be institutions buying up UBER along the way down and for that reason when the goals are met (40, 37, 35) we would cautiously liquidate those puts just to raise cash and protect the overall short position

So that being said if there are any comments about why the stock should go up we would like to continue writing about this as it progresses, there are still another 2-3 months for the plan to work, and even though this is a bearish trade we would still be open to protecting against all losses, and even ride the stock to maybe even a $100 valuation in the future.

It is early to tell, but from what I have heard, the company is not growing and they have been losing money for 9 years, any price shock would put pressure on management to change vital aspects of the business model and improve performance...


Damian Richardson
nice projections! good luck!
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