After a massive "gap and go" move in Dave stock, it looks poised to base for a bit before the next big move. Let's consider a long-term covered call in Dave stock.
The chart remains bullish but momentum is waning a bit as Dave stock holds near its highs. We'll analyze the familiar covered call further out in time but just outside the money, leaving the opportunity for a tidy upside while holding the stock through potential pullbacks.
Dave Stock: The Trade
First, consider trade structure. The term leap refers to an option position that is well into the future, customarily one year or more. But this trade is going to expire in January 2026.
The selling of the call option well into the future allows the trader to hold Dave stock at a discount. If the stock continues to rise, the call option can be covered. Then, a trader can open a new option against the stock. We commonly call this "rolling the strike." That way, we continue to both hold Dave stock and collect more revenue as time moves on and as the stock continues to climb.
If the stock fades, we have a solid cushion of profit that the short call provides.
Here are the details:
- Buy 100 shares of DAVE, currently trading near 217
- Sell to open one DAVE Jan. 16, 2026, 210 call, recently priced at $50.50
A 100-share position would allocate $20,705 to Dave stock, based on recent trading. Selling the call dated for Jan. 16, 2026, at the 210 strike would deliver a credit of $5,050 per contract.
The breakeven prices of the stock at expiration on this trade is calculated by subtracting the credit received against the cost of the stock, or $20,705- $5,050 =$15,655, less commissions. This implies the actual cost of each share would be reduced to $156.55.
Trade Management
In terms of key chart levels, the relative resistance zone sits right around 220, while support sits near 150. That happens to mark the high of the largest volume candle of the 2025 year.
Here are some possible ways to leave the trade.
First, hold the stock and the option until expiration in January. If the price of the stock is above 210, the trader will have to relinquish the stock at $210. Collecting the difference between the actual cost of the shares ($156.55) and the $210 strike price = $210 -$156.55 = $53.45, or a 34% return.
Second, set an alert in Dave stock for 156.55, the breakeven price. Sell the entire position if your risk thresholds are breached. The bullish trader might say, "Shouldn't I sell the call much further out of the money if I am bullish on the stock?" The answer is yes; however, if the market has any retracements of importance, selling the strike at the money provides a tidy cushion of support while still buying the stock for potential upside.
- Anne-Marie Baiynd is a 25-year veteran trader of stocks, options and futures and is the author of "The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology." You can find her on X at @AnneMarieTrades, Sirius Business Radio, Investors Business Daily, the Benzinga Pro platform as well as Topstep on YouTube
