September 8, 2023
Covered Call/Buy-Write: Buy Freshworks (FRSH) Stock and Sell the October 22.5 Call (exp. 10/20) for a net price of $21.60 or less.
As I highlighted earlier this week, Freshworks (FRSH) popped on my radar following several days of bullish option activity. That call buying was likely a play on the company’s Investor Day, which was well received by Wall Street (more on that below).
Today let’s get involved with FRSH by selling a defensive covered call, which will replace our IONQ covered call that should, though no guarantee, expire for its full profit next week.
To execute this trade you need to:
Buy FRSH Stock
Sell to Open the October 22.5 Call
For example, you could buy the stock for 23, and Sell the October 22.5 call for $1.40 (these prices are approximate, and I would expect you will get a better fill).
For every 100 shares of FRSH stock you buy, you can sell 1 call. For every 200 shares you buy, you can sell 2 calls. And so on …
The most you can lose on this trade is $2,160 per covered call should FRSH stock go to zero.
The most you can make on this trade is $90 per covered call should FRSH stock close above 22.5 on October expiration, or a yield of 4.16%.
Much like IONQ which I referenced above, FRSH stock is going to move around with growth stocks. So there will be some bumps in the road.
That being said, I like the risk/reward in this trade as the company Investor Day has passed, and earnings aren’t expected until the November expiration cycle.
Finally, here are some of the price targets for FRSH stock following the company Investor Day:
Credit Suisse – 23
JPMorgan – 25
Baird – 28
Oppenheimer – 26
Barclays -- 25
|Position (Original)|| FRSH October 22.5 Covered Call|
|Position Strategy||Covered Call|
|Opened Date||September 8, 2023|
|Expiration||October 20, 2023|