Uber Technologies shows impressive relative strength this year and is currently a Leaderboard stock. Setting up an unbalanced iron condor for Uber stock can give us a wide range to stay profitable while giving the trade a slightly bullish bias.
Creating The Unbalanced Iron Condor
As a reminder, an iron condor is a combination of a bull put spread and a bear call spread.
To make it an unbalanced iron condor for Uber stock we'll trade more put spreads than call spreads.
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First, we take the bull put spreads. Using the Oct. 20 expiry, we sell two put spreads with the 40-35 strike prices. That spread is trading around 50 cents. To make it unbalanced, we'll sell two contracts generating $100.
Then the bear call spread. Selling the 55 call and buying the 60 call with the same Oct. 20 expiry gives a credit of 20 cents for the spread.
In total, the unbalanced iron condor on Uber stock generates around $1.20 or $120 of premium for a block of 100 shares
Managing The Uber Stock Option Trade
The profit zone ranges between 38.80 and 56.20. This can be calculated by taking the short strikes and adding or subtracting the premium received.
Trading two put spreads on Uber stock for every one call spread gives the trade a slight bullish bias, but also more risk on the downside.
The maximum risk is $880 on the put side and $380 on the call side.
If we take the premium ($120) divided by the maximum risk ($880), this iron condor trade has the potential to return 13.6% in just a couple months.
According to the IBD Stock Checkup, UBER stock is ranked No. 3 in its industry group and has a Composite Rating of 89, an EPS Rating of 76 and a Relative Strength Rating of 95.
Uber stock has already reported earnings, so this trade should have no earnings risk.
Profit Opportunity For Previous Option Trades
We also have two broken-wing butterflies that were featured that have done well. The JPMorgan Chase broken-wing butterfly and a similar trade for Netflix. Closing them early now captures a nice profit.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions
Gavin McMaster has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. Follow him on Twitter at @OptiontradinIQ
