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  • Writer's pictureVladimer Kellachow

"Up-ing" the Portfolio with Upstart (UPST)

For the first week of the $10,000 account challenge, we are going to sell 6 $16.50 cash secured puts of UPST for .07 per share. After fees, this will net a profit of $38.10. Not too bad!

Selling 6 $16.50 cash secured puts on UPST for a net profit of $38.10.
Selling 6 $16.50 cash secured puts

Now to breakdown how I decided on this play. First, I headed over to my stock screener and set up a set of criteria to find my ideal stock. Since I live in the US and trade in US markets, I prefer to only trade US stocks. Also, since we are only using $10,000 for this challenge, I needed to filter out stocks that I couldn't sell options on due to the high price (100x's a share price can get expensive). I first tried searching for stocks that were between $50 to $100 a share, but didn't find any that fit my last two criteria, the stock being below analysts' predictions and higher than normal volatility. Since I couldn't find any stocks that matched all of these criteria and were between $50 and $100 dollars, I decided to filter by stocks that had a share price above $20 a share and ended up with the following filter.


Stock filter for US Stocks that you can sell options on that are over the price of $20 per share
Resulting stock filter

After this, I went through each stock to see if it had weekly options and what the current price of the option contracts was as of Friday the 23rd of September. For the risk exposure of delta = .05 and probability of the contract expiring in the money of 7.84%, $.07 per share is a pretty good deal. Below is a screenshot of the different strikes, there delta, and percentage chance of ending in the money. You should make your own decisions based upon your personal risk tolerance and financial goals.

Listing of different strikes and their risk profiles. Choose the strike and probability of ITM to make your best financial decision.
Listing of different strikes and their risk profiles

To double check how "safe" I felt about this investment, I looked at a historical graph of Upwork's stock price to see how often its price was below $16.50. While past performance doesn't necessarily equate to future results and the current economic situation is more than grim, the fact that the stock has never dipped to $16.50 a share is quite promising. Additionally, analysts seem to believe this stock has great upside in the future, so even in the off chance that this stock was assigned, I would not mind holding it.

Historical chart of Upwork. Note that the stock price is quite volatile, but has never dipped to $16.50
Historical chart of Upwork

With this brief analysis, I feel confident that this is a relatively safe strategy to earn $38.10. If assigned, I do not mind holding onto the stock and selling covered calls due to the upside potential presented by Upwork. I hope you enjoyed this analysis and I will see you here next week! Happy trading!


-Vlad


*This is not financial advice. Every investor should invest in companies and utilize strategies that maximize their financial goals within their personal risk tolerance. Trading options is a risky investment strategy.*


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