Short Strangle: How To Play DASH Earnings

I’m a long term DoorDash (DASH) bull but the stock is quite overextended heading into earnings Thursday afternoon. How to play it?

All of DASH’s key metrics – Gross Order Volume (GOV), Revenue, Adjusted EBITDA – have been trending up nicely quarter after quarter for a while now and I expect nothing different this afternoon. But how much juice is left in the stock after the run its had the last 16 months?

If you’re an uber-bull there’s nothing wrong with buying out of the money calls to speculate on a blowout quarter. In fact I’m tempted to do that.

But a better play might be a short strangle. That is, selling far out of the money calls and puts. You sell the calls because no matter how good the report, it could very well be a muted reaction given the run into earnings. You sell the puts because the report is likely to be good and so any downside limited. If the stock trades post earnings between the strike price of the calls and puts you sold, then neither contract is in the money and you collect the premium. That’s the goal with a short straddle.

I sold DASH 2/16 $145 Calls for 95 cents and have a limit order to sell DASH 2/16 $105 Puts for 65 cents. If DASH doesn’t trade above $145 or below $105, the options will expire worthless and I’ll collect the $1.60 in premium.

Warning: Selling options is risking – especially uncovered calls because you theoretically have infinite liability. This trade is for advanced traders only.

UPDATE (Thu 2/15, 12:20pm): I changed my mind and took this trade off because I believe the probability of a blowout quarter is higher than I at first thought and I don’t want to be short the DASH 2/16 $145 Calls.