DailyPlay – Opening Trade (LYFT) – August 8, 2023

LYFT Bearish Opening Trade Signal

View LYFT Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 20 Contracts Sept 15th $11/$8 Put Vertical Spreads @ $1.02 Debit per contract.

Total Risk: This trade has a max risk of $2,020 (20 Contracts x $101) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $101 to select the # shares for your portfolio.

Trend Continuation Signal: This stock is mildly bearish and is expected to continue lower. 

1M/6M Trends: Mildly Bearish/Mildly Bullish

Technical Score: 2/10

OptionsPlay Score: 125

Stop Loss: @ $0.56 Credit (50% loss).

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

As contagion risk out of China sours market sentiment we’re set to open lower today. However, one of our bearish earnings plays this morning is working nicely with UPS’s 2023 revenue guidance coming in nearly $4bn shy of consensus and the stock is now down over 5% pre-market. While this may seem like an obvious opportunity to take profits, I suspect that there could be further downside and will monitor price action this week on UPS to decide how long to hold onto this position.

Looking at earnings opportunities for today, LYFT reports after the close today and presents another bearish opportunity. High-valuation Tech stocks are having a tough time in this environment of 4% yields. Even earnings and revenue beats are typically not enough and many stocks continue to trade lower on the back of strong reports. While UBER had a great quarter, LYFT has likely lost further market share in the mobility space, without a Delivery business to make up for lost revenue. Additionally, just like UPS and UBER, labor costs and shortages continue to weigh on costs and margins are continuously under pressure in the transports. Trading at over 52x forward earnings, LYFT is expensive and at risk of a pullback on any soft guidance for 2023. I’m buying the Sept $11/8 Put Vertical @ $1.01 Debit. With a hypothetical portfolio of $100,000 we recommend risking 2% of it on this trade, which is 20 Contracts for a total risk of $2,020. We will set a stop loss on the spread at 50% of the premium paid, $0.50 Credit.

LYFT – Daily