Shares of ride share company Uber (UBER) have rebounded strongly off their annual lows in the past few weeks. One trader sees the possibility for some downside ahead.
That’s based on the September 23 $27 put. With 37 days until expiration, 4,491 contracts traded compared to a prior open interest of 103, for a 44-fold rise in volume on the trade. The buyer of the puts paid $0.44 to bet on a further downside in shares.
The stock last traded near $32.50, so shares would need to fall nearly 20 percent for the option to move in-the-money in the next few weeks. The stick price is still well over the stock’s 52-week low of $19.90 per share.
Shares saw a strong bounce as the company reported strong revenue growth in the most recent quarter. Yet the company is still losing money overall, and a potential slowdown in the economy could weigh on shares.
Action to take: Shares are potentially wroth buying on a pullback into the mid-$20 range or lower. The company is a leader in its industry, and has added innovations like food delivery to improve revenue in recent years.
For traders, shares have moved quickly enough that a modest pullback in the coming weeks could play out.
That makes the inexpensive put options look like an interesting trade to make now. Traders can potentially make high-double-digit gains on a strong enough drop in shares in the weeks 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.