Before we dive into this week’s covered call idea we need to address our stock positions coming out of April expiration, all of which we are going to sell as the market continues to be under pressure.
To execute these trades you need to:
Sell your RPRX Stock
Sell your EXEL Stock
Sell your RBRK Stock
Sell your LUV Stock
Moving on …
Despite an onslaught of tariff headlines and rumors, the holiday-shortened week was mostly quiet outside of a nasty sell-off on Wednesday. By week’s end the S&P 500 had lost 1.5%, the Dow had fallen 2.7% and the Nasdaq had declined by 2.6%.
The Stock – Uber (UBER)
Uber is a blue chip in the ride sharing and delivery businesses around the globe, with a top position in the former and clearly one of the big players in the latter, as well as some other burgeoning businesses (like advertising on its app). There’s also a decent freight business ($5 billion in sales, though it’s losing a little money) it has been looking to unload for the right price.
After surviving the pandemic and tightening its belt, the firm has been cranking out fantastic top- and bottom-line numbers, which is a big reason it was one of the early growth leaders (see below) a year and a half ago—however, investor perception took a hit on fears that the firm was falling behind in autonomous rides, which many see as being the future of the industry. (Tesla’s Robotaxi has made plenty of headlines on that front and there are many startups vying for the business.) However, Uber has been able to soothe Wall Street’s worries, as the firm has invested heavily in the technology and a former competitor (Waymo, owned by Alphabet) is now a partner, with clients able to use Uber to book that firm’s AUV taxis in Austin, San Francisco, LA and Phoenix.
Moreover, many are figuring out that, while it will eventually take hold, the next decade is still going to be human-based, so it’s not like Uber’s business is going out of style anytime soon. That’s likely a reason why hedge fund billionaire Bill Ackman has taken a stake, with the focus going back on the buoyant numbers Uber is cranking out quarter after quarter: In Q4, active users were up 14%, total trips grew 18% from a year ago and currency-neutral bookings were up 21% (24% for Rides, 18% for Delivery), all of which drove total EBITDA up a big 44%, with free cash flow coming in at $1.7 billion, or about 80 cents per share (up 122% from a year ago). (Additionally, the firm bought $1.5 billion of stock in January as part of an overall $7 billion buyback program.)
The good times should continue in 2025, too, with Q1 showing 19% bookings growth and EBITDA up in the 34% range. It’s a long-term, international growth story that should spin off huge free cash flow for many years to come. Earnings are due May 7.
Technical Analysis
UBER has been base-building for the better part of a year—it was a leader coming out of the November 2023 market bottom, but essentially topped in February and has since traded up and down in a wide range. But there has definitely been a change in character in recent months: Shares spiked on the heaviest weekly volume of the entire rest period in early February on reports of Ackman’s ownership, and while it dipped from there with the market (a) UBER held above its December low, and (b) volume was light. And lately the stock rallied back on higher volume. Stop – 63
The Covered Call Trade
Buy Uber (UBER) Stock at 74, Sell to Open May 70 Strike Calls (exp. 5/16) for $6.50, or a Net Price of 67.5 or less
Static Return: $250 per covered call (3.7%)
Breakeven: 67.5
Covered Call Return (if assigned): $250 per covered call (3.7%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 67.5 or less. (In this case 74 minus 6.50 = 67.5. Or another example is you could pay 74.50 for the stock and sell the call for 7, which also equals 67.5)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| AngloGold Ashanti (AU) | 35.75 | 44 | 30 | May 36 -- $2.10 | $7.50 |
| Monster Beverage (MNST) | 57 | 59 | 51 | May 57.5 -- $2.65 | $3.00 |
| Comstock Resources (CRK) | 19.2 | 19 | 17.5 | May 19 -- $1.70 | $1.50 |
The next Cabot Profit Booster issue will be published on April 29, 2025.
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