This morning, a small 100% Cash-Secured Put options position was established in Uber Technologies Inc. (ticker UBER) at the February 4th, 2021 options expiration date and the $30.00 strike price by selling three Puts at $.44 per share when the stock price was $33.12 (10.4% above the strike price). I usually have a few companies that I am interested in investing in at prices well below their current prices, so I established a Stock Price Alert using my broker's (Schwab's) Stock Alert service. I had established a $33.15 Alert price for Uber a couple of weeks ago and received an email from Schwab as soon as Uber's stock declined to $33.15 this morning.
This position had a probability of assignment of 81.5% when this position was established. Given that the next earnings report on February 9th is after the options expiration date, the Implied Volatility of these Puts was extremely high at 80.9 when this position was established. So, even though this Cash-Secured Puts position is deep-out-of-the-money (i.e. strike price well below the stock price), the potential annualized-return-on-investment is very high for this position.
Uber has developed a strong brand in both its ride-sharing and food delivery segments and the strengthening economy bodes well for its growth potential this year and beyond.
As detailed below for this Uber 100% Cash-Secured Puts position, there is potential for a +1.5% absolute return in 8 days (equivalent to a +66.9% annualized return-on-investment).
Uber Technologies Inc. (UBER) -- New 100% Cash-Secured Puts Position
The transaction today was as follows:
01/28/2022 Sold 3 Uber Technologies Inc. February 4th, 2022 $30.00 100% Cash-Secured Put options @ $.44 per share.
The Covered Calls Advisor does not use margin, so the detailed
information on this position and the potential result detailed below
reflect that this position was established using 100% cash
securitization for the three Uber Put options sold.
A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Put Cost Basis: $8,870.01
= ($30.00 - $.44) * 300 shares + $2.01 commission
Net Profit:
(a) Options Income: +$129.99
= ($.44 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UBER stock is above $30.00 strike price at the Feb. 4th options expiration): +$0.00
= ($30.00 - $30.00) * 300 shares
Total Net Profit (If Uber stock price is out-of-the-money (above $30.00 strike price) at options expiration): +$129.99
= (+$129.99 options income +$0.00 dividend income +$0.00 capital appreciation)
Absolute Return (If Uber is above $30.00 strike price at the Feb. 4th, 2022 options expiration) : +1.5%
= +$129.99/$8,870.01
Annualized Return: +66.9%
= (+$129.99/$8,870.01)*(365/8 days)
The
downside 'breakeven price' at expiration is at $29.56 ($30.00 - $.44),
which is 10.7% below the current market price of $33.12.
