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Earnings Play with Short Strangle on UBER (IPO)

Uber is a no stranger company for many of us before its IPO on May 10 2019. The first day volume was 186 millions share but lowest around 11 millions in the month of May 2019. UBER was going to report its first earning results since IPO on May 30th after market closed.

There was no prior earning data and we were unable to know how market going to react after earnings. There was no IVR (or IV Percentile in ThinkorSwim) data available for us to make decision. The IVR script I set earlier needs one year data on IV to plot first IVR data point. Since UBER was an IPO, there was no IVR data.

The stock price was stable around USD39 to USD42 two weeks before earnings. When looking at options chain, the option premium was high. So there was an opportunity to set wide strike prices using strangle for earnings play on UBER. 

 UBER earning strangle

1) Earning will be announced on May 30th after market closed. So I STO a strangle during market hours.

2) Since there was no IVR data available, I just manually looked at IV data. The IV was at highest point on May 30th. This confirmed that we have a chance for earnings play.

3) The premium of UBER was high too so we can set wide strike prices on strangle. Here's the setup on May 30th:

STO Jul 19 2019 CALL 47.00 @ 0.77

STO Jul 19 2019 PUT 33.00 @ 0.68

Premium received was USD145.00 for USD14 wide strangle.

4) After earnings was reported, which was within market expectation and no surprises, IV dropped and price did not change much. Now I have 20 to 30% of profit already.

5) I should closed the strangle for a profit but I want to wait for IV to going down further since it was a wide strangle and no big price movement.

6) There was a bullish candle with volume on Jun 5th and pushed the price up to USD45. So I rolled the PUT leg from USD33 to USD38 at same expiration, just one dollar below the support at USD39.

7) The stock price was trying to break resistance at USD45.53 until Jun 28th. I was preparing to roll up PUT leg to USD47 (making strangle becomes stradle) if stock price break above USD47.

8) Stock price dropped the next trading day (Jul 1st) with bearish candle and I decided to BTO this strangle on Jul 2nd.

UBER earning strangle profit

9) Total profit is USD149, which is more than initial target of 25% profit. 

Small Potato.


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