Established Covered Calls in Uber Technologies Inc.

This afternoon a new Covered Calls position was established in Uber Technologies Inc. (ticker UBER) with a March 19th, 2021 options expiration date.   A buy/write transaction entered at a net debit of $50.20 was executed by purchasing 300 shares of Uber at $54.99 and simultaneously selling three March 19th, 2021 Call options at the $51.00 strike price at $4.79 per share. The time value when this Covered Calls position was established was $.80 per share = [$4.79 Call options price - ($54.99 stock price - $51.00 strike price)].  Given the Covered Calls Advisor's current cautious outlook, a moderately in-the-money Covered Calls position was established.  The Delta was 77.6 which approximates a probability of 77.6% that the Call options will be in-the-money and therefore the stock assigned (i.e. sold) on the options expiration date. The Implied Volatility of these Calls was 46.6 today when this transaction was executed.

The Covered Calls Advisor self imposes a limitation of no more than one position at a time in a speculative company.  Most recently, the Covered Calls position in DraftKings was the sole speculative position and it expired in-the-money at the February 6th, 2021 options expiration for a nice profit.  Uber is the leading ride-sharing company in the U.S. and the now rapidly accelerating pace of Covid vaccine administration portends an accompanying acceleration in Uber's business (which is likely now experiencing a rapid inflection to substantial revenue growth this year (likely 40%+ in 2021 versus 2020).  As a speculative company, Uber was selected for the Covered Calls Advisor Portfolio primarily because it was one of only a few companies identified by a stock screener of highly rated companies by three of the Covered Calls Advisor's favored rating services (CFRA, Morningstar, and Reuters Research).  In addition, of 39 analysts' covering Uber, their average target price is $68.34 (24.3% above the stock purchase price and 34% above the $51.00 strike price).   

The Covered Calls Advisor also prefers to maintain a reasonable amount of Sector diversification.  Since the Raytheon Covered Calls position was closed by early assignment on February 25th, there has been no position in the Industrials sector in the Covered Calls Advisor Portfolio.  Although Uber would seem to straddle three different sectors (Consumer Discretionary, Information Technology, and Industrial), Schwab categorizes it as an Industrial (in that sector's Road & Rail industry); so this Uber position now fills the void in the Industrial sector in the Covered Calls Advisor Portfolio. 

As detailed below, the potential return-on-investment result is +1.6% absolute return in 18 days (equivalent to a +32.3% annualized return-on-investment).  

Uber Technologies Inc. (UBER) -- New Covered Calls Position

The simultaneous Buy/Write transaction was as follows:
03/02/2021 Bought 300 Uber shares @ $54.99 per share 
03/02/2021 Sold 3 Uber March 19th, 2021 $51.00 Call options @ $4.79 per share

A possible overall performance result (including commissions) if the stock price is above the $51.00 strike price at expiration would be as follows:
Covered Call Cost Basis: $15,062.01
= ($54.99 - $4.79) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,437.00
= ($4.79 * 300 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If Uber stock is above $51.00 strike price at the March 19th, 2021 options expiration): -$1,197.00
= ($51.00 - $54.99) * 300 shares

Total Net Profit: +$240.00
= (+$1,437.00 options income +$0.00 dividend income -$1,197.00 capital appreciation)

Absolute Return: +1.6%
= +$240.00/$15,062.01
Equivalent Annualized Return: +32.3%
= (+$240.00/$15,062.01)*(365/18 days)

The downside 'breakeven price' at expiration is at $50.20 ($54.99 - $4.79), which is 8.7% below the current market price of $54.99.