Is gig going big?

07/10/20
  • More workers may be shifting to contract/freelance work
  • Some companies servicing “gig” marketplace jumped in recent weeks
  • UPWK jumped 10% Thursday, FVRR at all-time highs

First there was the rush into mainstream “stay-at-home” stocks (streaming entertainment and chat, online shopping).

Then stay-at-home “infrastructure” stocks (cloud, security, and other tech companies that support remote working and living) grabbed the spotlight.

But one area of the pandemic-era economy that has gotten less attention is a potential growth area of the labor market—freelance (“gig”) workers. Although US employment stats have certainly tilted in a favorable direction the past two months, the jobs market is still digging itself out of a very big hole, and some analysts think the ranks of contract employees could swell if some “temporary” job losses turn out to be permanent.1

Workers launching freelance careers and companies needing to tap into this talent pool may increasingly turn to companies like Fiver (FVRR) and UpWork (UPWK), online marketplaces that allow these two groups to find each other. FVRR, which began trading a little over a year ago, has hit new record highs the past five days, but yesterday traders may have noticed UPWK landing on almost every potentially “bullish” LiveAction options scan, including high call volume, high call-put ratio, and largest positive net deltas:

Chart 1: LiveAction scan: Largest positive net deltas. Unusual options activity. High UPWK positive deltas.

Source: Power E*TRADE


Unlike FVRR, UPWK (which began trading in late 2018) is still trading well below its all-time high of $25, even though it’s rallied more than 200% off its April low and jumped more than 10% intraday yesterday (some traders may have noticed that, too):

Chart 2: Upwork (UPWK), 3/12/20–7/9/20. Upwork (UPWK) price chart. Extended breakout.

Source: Power E*TRADE


Yesterday’s push not only put a little more “out” in the stock’s recent breakout above its May highs, the weekly chart inset shows prices have rallied to their highest level since last August.

Some cautious bulls (i.e., those wary of sharp pullbacks in high-momentum stocks) attempting to capitalize on favorable deltas and recent upside momentum may have explored UPWK bull call spreads, such as the October $17.50–$20 spread shown here:

Chart 3: UPWK Oct. $17.50–$20 call spread. Bull call spread risk-reward profile. Conservative long play.

Source: Power E*TRADE


The long $17.50 call should gain ground if the stock rallies, while the short $20 call lowers the cost of the trade while also capping its profit potential—the maximum upside occurs when the stock reaches the higher strike price. But the positive side of this trade-off is that the spread’s maximum loss is limited to the cost of the spread (plus commissions).

If the gig economy grows the way some analysts expect it to, there may be more opportunities in these stocks, pullbacks aside.

Market Mover Update: Biohaven Pharmaceutical (BHVN) pulled back yesterday after its 8.2% upside breakout on Wednesday (see “Stock pauses, options don’t”).

Today’s numbers (all times ET): Producer Price Index, PPI (8:30 a.m.).

Today’s earnings include: Infosys (INFY).

 

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1 Forbes. The New ‘Interim Economy:’ How Employment Has Dramatically Shifted. 6/4/20.

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