Uber. Okay, guys, I’m going to go over a little trade example that I would make on Uber. First off, I’m not a big Uber fan. Sure. I use Uber. Just about everyone does that lives in a city and I love the Uber service, but as a company, not so sure about Uber.
I know that it’s like the big to-do stock. It’s, you know, hyped up. Everybody’s pumped up about it. I’ve never understood the whole hype thing and why people get so pumped up about stocks and start throwing their money into it, thinking it’s like the next thing that’s going to explode 500%. There’s other ways to make money and more substantial, just fluid, sustainable income in the options market and buying stocks, selling covered calls.
I always advise to do that versus throwing all your money into a crazy hyped up stock like an Uber. Nonetheless, if you’re hot to trot on Uber and you want to figure out some ways to make money on Uber, here’s a way I would make money on Uber and have made money on Uber. Actually based on their quarterly results that were just released yesterday that didn’t look too hot, I made a bunch of money off of that. We’ll make a bunch of money today just because that stock is moving like crazy. I think it’s like down 8% this morning pre-market. I’ll be selling a bunch of spreads and making a bunch of money off of that today.
Here’s just a good example. I’m using the think or swim on demand platform. I rewound to a day where there was a lot of movement on Uber. July 1st, 2019. This is at 3:45 in the afternoon. On this day, the stock is down. Right now 4.65%, right? What happens when the stock moves down? Well, everybody’s going to freak out and start buying and selling puts. Okay. If it was up, they’d be doing the same thing for calls.
First off, if some of this language and the things I’m saying sound like a totally different language to you, then make sure to check out the links below. You can read my book, you can go through the different videos and courses that I have just training you on options and the basics just kind of explaining more of what in the world I’m talking about here.
Anyways, what I will do is I will look for a day like today on a stock like Uber and today, meaning July 1st, 2019 where there’s a lot of movement on this stock, and I will come in here and depending on how much premium I want to take, how much of a move I want to make on this stock, I will either stick with like a really close weekly expiration date or I will go out a little bit further.
Okay. I’m just gonna like kind of look at this and figure out what’s going on. This is literally the first time I’ve seen this options chain. One of the things I love about when a security that I kind of like know or especially ones like value stocks that I actually want to put my money into when they start falling really hard … Like if there’s a pullback or some bad news that came out or something like that that’s my favorite time to buy options or sell options.
Usually selling options just because usually you can get into the puts and go and sell a put at a price that makes you some premium. Also if the stock was to fall and that put go in the money, man, it means you’re going to have to buy one of your favorite stocks at a really great price, right? And keep the premium that you sold.
It’s probably one of my favorite strategies. With Uber, I would actually be disappointed if I had to buy it at just about any price, but nonetheless, here’s how you can make some money off of Uber.
If you wanted to like stick really tight and you’re like, okay, in the next four days, I don’t think it’s gonna move down past, you know, 42.50, that’s another what? 5% drop? That means it’s going to drop a total of 9% given the drop today, plus the next couple of days. Then there would be your strike right there.
You’re going to probably want to look at probability and the money, which unfortunately in the think or swim on demand platform these all get blown out after like a week or two. That’s not the real probability and the money, obviously. It’s probably really low right here. I would guess like maybe 15% or something.
That’s probably right about where I would stick and I would just see if I go to sell this vertical … Let’s see. Yeah, I’m going to take in $5 per vertical that I sell. Let’s see what that does to our buying power. Yeah, it’s gonna take off. Only $45 if buying power affects. Depending on your account size, you could sell a bunch of these or not a bunch of these.
This is a virtual account. It says I have $100,000. I’ll go in here and … Let’s say like 50 of these. I don’t even know if there’s enough open interest. Yeah, there is. Okay, so there’s 539 open here at some price that people are wanting to either buy, sell, whatever. 50 should be good and …. That didn’t get through.
Let’s figure out why. I’m going to have to adjust the price a little bit. Let’s go to four. If it doesn’t work there I’m moving out. Okay. I mean, that’s lower than really would get me interested. Let’s just see how it plays out over the next couple of days here.
If all goes well and Uber does not move down to … The math probably going to be like 42, 10, 20, something like that, 25, then I should stand to make 50 … Let’s see the spread for … A couple hundred bucks, $200. I did that math because I bought and sold and it’s the difference between these two. It’s 4 cents, 50. Do the math, $200. Okay. Let’s see how it plays out.
Let’s go right here. Actually, I don’t need to go that far. Let’s go two days ahead and let that buffer and then … Cool. We already made our $200. Obviously I didn’t know this ahead of time so don’t think I was rigging it here. It looks like Uber had moved out.
I’m going to move out to like a five day window just so I can see here on the left. Yeah. Cool. Basically just had some movements down, some movements up. Look at the range, like 43 … It doesn’t sound like a lot when you’re like, “Oh it’s just two bucks” but it’s 5% move on a stock. I mean, it’s got a lot of volume on it. It’s not like this thing goes all over the place, even though it is pretty volatile. It’s not like it just magically drops like 10% every day or rises 10%. Anyways, this trade’s already maxed out.
I probably could have cashed out the day before this, it probably moved pretty quick, but what happened was there was a ton of volatility, implied volatility, getting priced into those puts that I did this spread on. If the stock moves the other way and like has a solid move the other way, not only are those options just naturally going to fall in terms of price, which if you’re selling a spread, then that helps you. Right?
There’s time value. Okay? Then a weekly option. That is a crazy factor, especially towards the end of the week. Not as much premium to be had as well but the time value is awesome. Then, you know, all that volatility was priced in as well. As soon as people who are all hyped up about it going down, start going, “Eh, I guess that’s not going to happen”, well, that sucks the life out of those options as well, which if you sold them, helps you. If you bought them, good luck. I would never buy options like that.
Okay. You’re working against yourself so much. So much better to sell in this case. I’ve already realized it’s $200. I can just wait and take my chances that it won’t go there until the end of the week and let these expire out of the money, not pay any commissions or anything, and get the full $200 or what I will probably do in this case, because I don’t really trust Uber, is I’ll come back in here and I’ll close this out by buying and I’ll try just to get it at 1 cent.
I did and I made $150. Yes, I just gave up $50 to close out this transaction early and some people be like, “Dude, that’s crazy. You should just let it expire.” I don’t care. I want my money back. I want the buying power back.
In this case, it really didn’t have that big of effect with the buying power effect but it was tying up money. There was additional risk. I’d rather take my $150 and move on to the next trade and maybe do that a couple more times before the end of this week or move up to some monthly options and do a similar thing once I get a feel for a stock like Uber.
That’s how I make money off of something like Uber. I’m definitely not buying, you know, 1000 Uber shares right now or even short selling them. Why would you do that? I can make more money just focusing on selling options, selling spreads over and over again. It’s much more controllable, the probabilities are much more in my favor. I can actually look and tell you the probability at any given point in time that I’m going to make or lose money on Uber. Whereas buying and selling the stock, you just cannot do that. That’s why I love selling options in particular and just options in general.
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