Trading Upwork (UPWK)

 

Selling Cash-Secured Puts on Upwork (UPWK): Diving In for Steady Income (October 2024 Update)

Greetings, fellow options traders! Welcome back to Sharkwater Trading, where we navigate the market's currents to find opportunities for steady returns. Today, we're setting our sights on Upwork (UPWK), the leading online platform connecting businesses with freelance talent.

Why UPWK?

Upwork boasts a strong position in the gig economy, and its recent performance reflects that. The company reported solid Q1 2024 results with revenue growth and increasing profitability. However, the stock market can be fickle, and UPWK's price can fluctuate. This presents a chance for us to utilize a strategy that benefits from both bullish and neutral market movements: selling cash-secured puts.

The Cash-Secured Put Play on UPWK

We'll focus on the January 2024 $10 strike put. By selling this put, we're essentially making a bet that UPWK's share price will stay above $10 by expiration in January. Here's the breakdown:

• Action: Sell to Open 1 UPWK January 2024 $10 Put Contract (per share)
• Collateral: You'll need to have at least $10 x 100 (contract size) = $1,000 in your brokerage account for each put contract sold. This cash acts as collateral and is only taken away if UPWK falls below $10 by expiration.
• Potential Profit: The maximum profit you can earn is the premium you receive for selling the put option. As of today (October 16, 2024), this premium could be around $[premium amount] per share (be sure to check your specific broker for live quotes). This translates to $[premium amount] x 100 (contract size) = $[total profit] for each put contract sold.
• Potential Loss: If UPWK's price falls below $10 by expiration, your put option will be exercised, and you'll be obligated to buy UPWK shares at $10 per share. This could result in a loss if the stock price stays below $10 for an extended period.

Who is this Strategy For?

This strategy is suitable for investors who:

• Are bullish or neutral on UPWK's long-term prospects.
• Seek to generate income through option premiums.
• Are comfortable potentially owning UPWK shares at a discounted price ($10 in this case) if assigned.

Important Considerations

• Earnings: Upwork is scheduled to report Q3 earnings on November 6, 2024. Implied volatility might increase around this date, potentially affecting option prices.
• Market Volatility: Broader market movements can impact UPWK's price. Be prepared to adjust your position if needed.
• Time Decay: As expiration approaches, the time value of the option decreases. This can affect your potential profit even if UPWK stays above $10.

Remember: Options trading involves risks. Carefully consider your risk tolerance and research the strategy thoroughly before making any trades.

Conclusion

Selling cash-secured puts on UPWK offers a potential way to generate income and potentially acquire shares at a discount. However, it's crucial to understand the risks involved and actively manage your position.

What are your thoughts on UPWK? Would you consider this put-selling strategy? Share your insights in the comments below!

Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.