Doordash's Earnings Are Expected to Move Sharply in the Options Market. How to trade it?

DoorDash Inc. (DASH), a major player in local commerce and delivery services, is set to release its second-quarter 2025 earnings on August 6. The stock has been on an impressive run, climbing nearly 50% year-to-date and surging almost 140% over the past 12 months.

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Currently, the shares are trading at a lofty valuation of 9.4 times trailing 12-month revenues and 192 times adjusted earnings per share (EPS). This raises a crucial question: can this extraordinary momentum continue?

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Analysts project second-quarter revenue of around $3.1 billion, marking more than 20% growth compared to last year, along with an adjusted EPS of $1.10. For context, 2024 was the first year DoorDash posted a full-year profit, delivering $0.79 a share in adjusted earnings.

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This underscores the company’s transition from a high-growth startup to a profitable player in the delivery sector—a transformation that partly explains its elevated multiples and substantial stock price appreciation.

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Despite these achievements, DoorDash is showing signs of moderating growth in its core business segments while facing mounting competition. Given the stock’s sharp upward trajectory, even strong earnings may not translate into another big post-report price surge.

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The first quarter provided an early signal of this moderation: although DoorDash beat EPS expectations, revenue fell short as food delivery growth slowed to 13% year-over-year. Looking ahead, forecasts for 2025 suggest aggressive expansion, with optimistic scenarios pointing to significant gains.

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However, even bearish estimates project a compound annual growth rate of 25% in revenue—a strong pace for a maturing business. Yet, there are other companies, such as Nvidia, that are growing faster and trading at much lower valuation multiples.

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The options market anticipates that DoorDash’s stock could move about 8.5% following the upcoming earnings announcement. This projected move is higher than the company’s average post-earnings move of 5.2% over the past four quarterly reports and is above the historical average since its IPO.

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Investors looking to capitalize on these elevated options premiums might consider strategies like selling straddles or strangles. This approach involves selling both a call and a put option when expecting the stock’s actual price movement to be smaller than what the options market implies.

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While potentially profitable, this strategy carries significant risk if the stock moves sharply in either direction. For instance, selling an August 29 expiration strangle with strikes at $225 and $285 could yield a premium of about 3.7% of the current stock price in just under five weeks—a return equivalent to over 39% annualized.

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However, if DoorDash’s shares swing significantly, the seller could end up with an unfavorable position: either being forced to sell the stock at about $294 (the call strike plus premium) or buy it at roughly $216 (the put strike minus premium).

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Managing Risk with a Strangle Swap

To mitigate such risks, investors might opt for a “strangle swap,” which involves buying a longer-dated, slightly out-of-the-money strangle to define and limit potential losses while maintaining a similar payoff profile.

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For example, purchasing a November-dated strangle with strikes at $220 and $290 offers risk control and leaves room for future price movements. The actual value of this November position by the August 29 expiration would still reflect more than two and a half months of remaining time until it expires around Thanksgiving.

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This approach provides a way to stay positioned for volatility while reducing the chances of large losses that could come from selling near-term strangles outright.

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Overall, DoorDash remains a young, rapidly growing company that has just crossed into profitability. Its high valuation mirrors investor optimism about its long-term potential but also sets a high bar for future performance. With revenue growth moderating and stiff competition ahead, the upcoming earnings report will be crucial in determining whether the stock can sustain its remarkable rally.

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Options traders, meanwhile, face a choice: bet on a large post-earnings move or use strategies like the strangle swap to profit from volatility while keeping downside risk contained. Whatever the approach, the coming weeks will be a critical test for DoorDash’s momentum and investor sentiment surrounding the stock.

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