DocuSign (DOCU): Priced-In Optimism Doesn’t Preclude Making Money

It’s a common theme in the market. If you’re reading about a particular story in The Wall Street Journal, it’s already too late — at least if you intended on profiting from the juicy development. Prior to the breaking news, traders had already placed their bets. As such, the stock has already moved and it’s unlikely that coming in after the fact would grant you viable profitability prospects.

Take for example DocuSign (DOCU). The San Francisco-based software company — which provides products for entities to manage electronic agreements with e-signatures — crushed its latest earnings report for its second quarter of fiscal 2025. As Barchart contributor StockStory reported, below are the key statistics regarding the financial disclosure:

• DocuSign generated revenue of $736 million, beating the consensus view of $727.8 million.
• Adjusted operating income landed at $237.2 million, exceeding the forecast of $202 million.
• Earnings per share (non-GAAP) hit 97 cents, jumping past the expert estimate of 81 cents.
• Billings reached $724.5 million, up 1.9% year-over-year (thus slightly beating estimates).
• Gross margin was 78.9%, in line with the year-ago quarter.

To be fair, not every metric represented a sterling improvement. Free cash flow margin was 26.9%, dipping below the previous quarter’s 32.7%. Also, full-year billings guidance was $3.01, which represented a slight raise but a miss against the consensus target.

Still, the overall picture was very positive, especially given the double-digit-percentage EPS beat. Further, management raised its sales guidance for the full year slightly to $2.95 billion at the midpoint, up from the prior $2.93 billion.

“Docusign continued its evolution with improved business stability and increased efficiency, resulting in record operating profit,” DocuSign CEO Allan Thygesen remarked. It was an impressive achievement. Still, it’s not clear whether DOCU stock will scream higher from here.

Barchart Identifies a Compelling Bull Put Gem for DOCU Stock

In the trailing month, DOCU stock managed to gain almost 13% of equity value. Following the earnings disclosure, shares moved up about 1% in the afterhours session. While a decent performance, the latest moves suggest that DocuSign may be running out of gas. Even more worrisome, DOCU is merely slightly below parity for the year.

In other words, a speculative position — buying calls in anticipation of a move higher or buying puts hoping for a downturn — doesn’t seem attractive. Yes, DOCU stock has been on the run. However, in the past five sessions, it actually lost 2.42%. On the other hand, being bearish against DocuSign doesn’t make much sense either, given the earnings beat and improved sales guidance.

So, what’s a shrewd investor to do? You can bemoan the lack of directional opportunities or you can use the stalemate to your advantage with a bull put spread.

Under Barchart Screeners, the company features a relatively safe methodology called “Bull Put Gems.” On Thursday, it identified an enticing prospect in generating income off DOCU stock put options with an expiration date of Sept. 6 (today). Here’s how the trade breaks down:

• Sell (for income) the $51 put at a bid of 81 cents.
• Buy (to cap downside risk) the $50 put at an ask of 61 cents.
• The breakeven price is $50.80.
• Maximum profit is 20 cents per contract (multiply by 100 shares for the total profit).
• Maximum loss is $1.62 per contract.
• Risk-reward ratio is 4.00 to 1 (for every dollar of income, the trader puts $4 at risk).

Basically, as long as DOCU stock stays above $51 prior for the entire session, you receive $20 for every one bull put spread that you transact. Because DOCU closed at $56.93 on Thursday, this tip seems a reasonable way to scalp some profits before the weekend.

Don’t Lose Sight of the Bigger Picture

Now, I know what you’re probably thinking: this article only has a shelf life of a few hours! And if you happened to just come across this story following Friday’s close, well, you’re out of luck.

Certainly, as far as the Sept. 6 puts are concerned, this article is hardly what you would consider evergreen content. However, it’s important not to lose sight of the bigger picture. Barchart’s Bull Put Gems is constantly on the prowl for new opportunities. Sometimes, there are no compelling trades available — and in that case, you’ll see a blank screen.

Chances are, though (especially during the “meaty” part of the week), Barchart will identify several of these simple but powerful multi-leg options. Relatively speaking, these are higher probability, controlled-risk trades — so long as you’re inputting the trade accurately.

When placing bull put spreads, the rule of thumb is as follows: to cap (or limit) the risk of a sold put, you must buy a put of the same expiration date at a lower strike price. For example, if you sold a put at $20, then you must buy a put at $19 (or $18 or any number lower than $20).

Make sure you’re inputting this step accurately and the bull put spread could be a powerful tool in your trading arsenal.