While there is no Options Income Blueprint Live Trading Session today, we are going to put on two new trades.
The first is a familiar name to longtime members, online pet retailer Chewy (CHWY). The company reported its latest quarterly results on March 23, delivering record revenue, profitability and free cash flow.
Revenue was up 13.4% year over year to $2.7 billion. The company generated net income of $6.1 million compared with a loss of $63.6 million in the year-ago quarter. And margins expanded despite rising costs.
The one sore spot was that the number of active customers declined on a year-over-year basis and sequentially to 20.4 million. With customer growth stagnating, Chewy’s push into pet health care will be key to the company’s continued growth.
The stock initially sold off after the announcement, bottoming out around $33 before turning higher. Let’s pick up a nice chunk of cash by selling a put with a strike $1 above that level.
Our second trade is in delivery platform DoorDash (DASH). After a rough 2022, the stock is back in favor, up more than 30% in 2023 and showing strong relative strength.
While not yet profitable, the company’s losses are shrinking and revenue is expected to grow at a double-digit percentage clip this year and next. However, please note that this is meant as a short-term trade, not a long-term position. DoorDash has a history of missing earnings estimates, so we plan to be out of the position well before the next announcement, which is expected in mid-May.
That said, current volatility is allowing us to sell a put that is nearly 8% out of the money, providing a good deal of flexibility should the stock move against us.
Please do not chase the trades by accepting less premium than the “go as low as” prices recommended below. Work your limit orders but exercise patience and let the trades come to you.
Chewy (CHWY)
Current Stock Price: $36.50
Action: Sell to open CHWY Apr Week Two (4/14) 34 Put
Current Option Price: $0.42-$0.47
Recommended Limit: Set your initial limit order at $0.44. You can go as low as $0.38, but please don’t start there and always use limit orders.
Expiration: After the close on Friday, April 14
Potential Rate of Return: 1.3% in 11 days, or 43% annualized, if this option expires worthless
DoorDash (DASH)
Current Stock Price: $64.21
Action: Sell to open DASH Apr Week Two (4/14) 59 Put
Current Option Price: $0.51-$0.55
Recommended Limit: Set your initial limit order at $0.53. You can go as low as $0.45, but please don’t start there and always use limit orders.
Expiration: After the close on Friday, April 14
Potential Rate of Return: 0.9% in 11 days, or 30% annualized, if this option expires worthless