Unusual Options Activity in BEKE, VOD and UBER

August 23, 2021

Catching Falling cash

Trying to catch the bottom (or sell the top for that matter) is a fool's game. It cannot be done with any consistency. 

However, we can find ranges of "the bottom" to start thinking about risk-reward using options. 

Here are 2 names that seem near a trading bottom and 1 that is already trying to turn.

Tread carefully...

UNUSUAL OPTIONS ACTIVITY

1. Bad News, Stock Up = BUY!?!?!

2. A 5G “Value” Stock Making a Comeback

3. I Buy Some Here. If It Declines 35% More, I Buy it All!

Let’s get started...


UNUSUAL OPTIONS ACTIVITY UBER

Bad News, Stock Up = BUY!?!?!

UBER Prop 22 Trade Idea

UBER was down sharply in pre-market on a California ruling striking down a law that classified drivers as contractors rather than employees. 

“Superior Court Judge Frank Roesch said Proposition 22, which was passed by voters in November, was unenforceable and unconstitutional in a ruling on Friday. Uber, Lyft, DoorDash, and other app-based companies pumped more than $200 million into supporting Proposition 22, which made their businesses exempt from treating drivers as employees under state law. The measure was passed when 58% of California voters backed the proposition.”

The company will obviously appeal.

In the meantime, Morgan Stanley announces UBER as a Top Pick (outside FAANG, of course) today:

“We see positive company-wide EBITDA in 4Q:21 and as we have seen with other cash burning businesses turning the profit corner (such as SNAP in ’19/’20) we see a positive profit swing driving incremental investor interest and earnings power confidence… In our mind, investors are not giving UBER credit for its core Rides/Eats offering, platform advantages, or call options like grocery delivery ... or autonomous.”

They have a $72 Price Target, which is 80% higher than where it’s trading. We’ve highlighted UBER here, where a Put Seller indicated they were buyers at the $40 level. And it appears they showed up today.
UBER Stock Chart 082321

After trading sub-$39 near the open, buyers stepped in pushing it strongly back through $40. That’s a bullish sign. However, getting back to $72 likely takes some time as there has been a lot of stock/call buying on the way down, which will offer some supply on the way up.

UBER Unusual Options Activity 082321

Front month calls have the highest options volume today, but I think you are going to need some time here and a good earnings announcement to show investors things are back on track.

Those November $42.50 and $45 Calls don’t look bad for a potential rebound in the stock. There have been buyers of the 55s and the 60s over the last few weeks. Maybe even a Call Spread???


UNUSUAL OPTIONS ACTIVITY VOD

A 5G “Value” Stock Making a Comeback

VOD Trade Idea

VOD disappointed the Street with a poor earnings report in May. Instead of showing higher free-cash flow they made investments for the digital future. Their argument was that Covid-19 pushed up digitalization by 5 years increasing the need for stronger networks (i.e. 5G) right now.

After that drop in May, there was a flurry of October $19 Calls bought over the course of a week. Goldman Sachs had added VOD to its conviction list:

“Vodafone stands out as a ‘value’ stock in European telcos. Our thesis is predicated on the group’s superior structural growth, compounded by best-in-class digital efficiencies, driving sector-leading FCF [free cashflow yield] and returns improvement.”

The stock took another nosedive since, but it’s trying to turn the corner. Take a look…

VOD Stock Chart 082321

The stock has some resistance up ahead at $17.40 and $18.30.  

VOD Unusual Options Activity 082321

A buyer stepped in to buy 10k VOD January $18 Calls for $0.64 this morning.  VOD’s next earnings announcement is in late November. Will 5G be savior?

Here’s a “fun” look at what 5G is all about.   


UNUSUAL OPTIONS ACTIVITY BEKE

I Buy Some Here. If It Declines 35% More, I Buy it All!

BEKE Trade Idea

Most Chinese stocks have made sharp moves lower. BEKE is no different. This Chinese real-estate stock, think Zillow meets Redfin with some financing thrown in, has dropped from $50 to $15 in 7 weeks on the back of the Chinese crackdown.

The chart is a disaster…
BEKE Stock Chart 082321

For anyone left bullish, the high volume on the way down over the last month indicates that investors are leaving. It also may indicate that new long-term investors are arriving.

The Unusual Options Activity in BEKE today indicates that maybe there is some value in the stock… maybe.

BEKE Unusual Options Activity 082321

It doesn’t pop up on the New Options Chain because it’s wayyyy out of the money, but a seller stepped in to sell 143k BEKE September $10 Puts at $0.22. This means they would buy 14.3 million shares at $10 (or $143 million) if it got down there... 35% lower. That’s a decent size trade!

I always find it interesting to see where/when someone sticks his neck out.

So, is this a sign that the Chinese stocks have come down too far?

A high-profile Chinese banker thinks it’s the right time … for the right stocks. 

“If you take China as a corporation, the challenge, problems the company has been facing in the past 40 years versus the challenges that it’s facing for the next 40 years are very different,”
Stay tuned…

Now go make some money!

Best,
Felix

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