IPO stocks have captured the imagination of investors this year. A slew of high-profile companies (and even some not-so-well-known ones) have delivered robust profits to shareholders. And it’s not just the buy-and-hold folk being rewarded. Momentum lovers and tactical traders are finding ample opportunities in the class of 2019.
It is this latter group that will find today’s gallery most helpful. We’re featuring three IPO stocks currently flashing compelling chart patterns for bullish trades. Freshly minted stocks in the public square offer the potential for big gains and big losses. Some, like the Facebooks (NASDAQ:FB) and Paypals (NASDAQ:PYPL) of the world go on to become mega-winners granting triple-digit returns. Others — think Blue Apron (NASDAQ:APRN) — quickly head toward zero.
The potential for outlier returns is what makes playing IPO stocks so darn attractive. To help boost your odds, we’ll suggest options trades for each of today’s selections.
Let’s take a closer look.
3 Options Trades for 3 IPO Stocks: Uber (UBER)
We begin with the most popular and undoubtedly the most widely anticipated stock of the bunch — Uber Technologies (NYSE:UBER). Though we’ve yet to see eye-popping returns, the price action for UBER stock has been quite constructive since last month’s IPO.
A series of higher swing highs and higher swing lows have formed, creating a short-term uptrend. Recently UBER stock formed a textbook five-bar pullback to its rising 20-day moving average (yes, we now have a 20-day MA to play with!). The selling was orderly, and the retracement did nothing more than return the stock to a previous resistance zone.
Traders banking on the principle of polarity will look for the old ceiling to become a new floor. If you’re willing to bet UBER will sit above $39 at July expiration then sell the July $39/$34 bull put for 60 cents. The reward is $60 per contract, and the risk is $340. Options are pricing in an 80% chance of success.
Beyond Meat (BYND)
Beyond Meat (NASDAQ:BYND) has taken the Street by storm. From its humble opening print of $46, the purveyor of plant-based meat substitute products has grown into a stock vying for world domination. At last week’s peak of $186.43, BYND stock’s gains eclipsed 305%. And it’s barely even one month old!
Skeptics will justifiably point out the meteoric rise being a byproduct of an epic short squeeze that took place after earnings. There’s no doubt BYND has completely detached from its underlying fundamentals. But such is always the case in the early days of an IPO. Hype and sentiment reign supreme.
Options provide a simple way of gaming the excessive volatility. Premiums in BYND options are through the roof. If you think the stock can stay aloft for the next few weeks, then selling puts offers an attractive payout. For example, you can sell the July $85/$80 bull put spread for 70 cents. The reward is $70 per contract and the risk is $430. This trade offers a 91% probability of profit.
Zoom Video Communications (ZM)
Zoom Video Communications (NASDAQ:ZM) takes the final spot of today’s featured IPOs. Since its public debut in April, ZM stock has grown 55%, from $65 to $100.50. Buyers have dominated all along the way, creating a series of higher swing highs and higher swing lows.
The upside accelerated following last week’s earnings announcement. Since then, volatility has remained elevated, but bulls have proved willing to defend their turf. Tuesday’s drop threatened to move into the earnings gap but was quickly reversed by yesterday’s rally.
High volatility is keeping options premiums pumped and ripe for the selling. If you’re willing to bet ZM sits above $80 at expiration, then sell the July $80/$75 bull put spread for 65 cents. The reward is limited to $65, and the risk is $435. Your probability of profit is 88%.
As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.