Today’s spotlight for unusual stock options volume was always going to be DocuSign (DOCU). On Friday, shares of the cloud-based software provider soared almost 28%. Despite DOCU stock carrying a lackluster Hold rating among Wall Street analysts, the underlying enterprise — which is known for its e-signature services — blew past expectations for the third quarter.
Results came in the preceding afternoon, with DocuSign generating revenue of $754.8 million, representing 7.8% year-over-year growth. This tally significantly exceeded analysts’ expectations of $745.3 million. On the bottom line, the company posted adjusted earnings per share of 90 cents, also beating the consensus view of 87 cents.
Even better, management raised its full-year guidance for billings, revenue and operating income. Now, the leadership team anticipates Q4 billings to land at $875 million, exceeding expectations by 1.5%. Revenue for the quarter may hit $760 million at the midpoint, roughly in line with analysts’ call.
While DOCU stock has previously attracted skepticism (especially given its Hold rating), the results speak for themselves. As Barchart contributor StockStory stated, “[a] company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, DocuSign grew its sales at a 14.2% compounded annual growth rate.”
To be fair, StockStory believes that DocuSign’s growth fell a bit short of its benchmark for the software sector. Nevertheless, the overall narrative is arguably very positive. Even with competitive challenges within the broader digital transformation — including artificial intelligence — DOCU stock has maintained relevance for investors.
It was already up big prior to the Q3 earnings report. Now, it features a year-to-date performance of nearly 88%. That might dissuade investors from taking a shot. However, if you must trade DOCU stock, there’s a smarter way to approach this name.
DOCU Stock Gets Much Love Despite Lofty Valuation
It’s no secret that many investors are leery about betting on a security that has already enjoyed a massive pop. However, enthusiasm for DOCU stock in the derivatives market has been quite intense.
First, there’s the whole business of it landing in Barchart’s screener for unusual stock options volume. Following last Friday’s closing bell, total volume reached 161,045 contracts against an open interest reading of 212,779 contracts. This tally represented a 761.09% lift from the trailing one-month average volume, a considerable feat.
Not surprisingly, call volume outweighed put volume, 110,563 contracts to 50,482 contracts. This pairing yielded a put/call volume ratio of 0.46, on paper favoring the bulls. However, it’s also important to understand which side is doing the buying and the selling. As it turns out, options flow — which focuses exclusively on big block transactions likely placed by institutional investors — revealed that net trade sentiment clocked in at $10.25 million.
That’s wildly bullish. Indeed, the biggest premium paid was for bought $95 calls which expire on Jan. 16, 2026. You don’t want to make too many assumptions with options-related transactions but this lengthy exposure is a good sign. So, while DOCU stock may fluctuate from here, the overall trajectory may be positive.
Of course, a lot of things can happen between now and January 2026. If you want a shorter-term trade, you may consider a bull call spread. With this options strategy, the simultaneous selling of a higher-strike short call helps offset some of the debit paid for the lower-strike long call. Effectively, it’s a way to discount a bullish position featuring limited reward and limited risk.
For the astute speculator, the 100/110 call spread expiring this coming Friday (Dec. 13) is enticing. By putting $605 at risk, you have the chance to earn $395 or a payout of 65.29%. Notably, the breakeven price sits at $106.05, 0.88% below Friday’s close. Barchart rates this trade’s probability of profit at 54.1%.
I’ll let you in on a little secret — the “real-world” probability might be noticeably higher.
A 500 IQ Move is Available to be Exploited
Using historical pricing data — available to download for Barchart Premier members — we can extract the weekly performance of DOCU stock over the past five years. Performance in this case is defined as the percent difference between the week’s opening price (Monday morning) and closing price (Friday afternoon). Frankly, the ratio isn’t all that impressive: 52.85% were “up” weeks, 47.15% were “down.”
Now, over the past one-year period, the ratio improves slightly: 55.77% were “up” weeks, 44.23% were “down.” However, keep in mind that our profitability threshold for the 100/110 call spread is 0.88% down from Friday’s close. This figure needs to be plugged into our calculations. Doing that, our trailing five-year success ratio jumps to just above 60%, while our one-year success ratio soars to 67.31%.
Here’s where it gets really interesting. The 97/110 call spread lowers the breakeven price to $105.60 or 1.3% below Friday’s close. Plugging this baseline into our probability matrix, the success ratio for the five-year period improves modestly to 63.88%, while the one-year period is just a blip to 69.23%.
The thing is, the payout for the 97/110 call spread drops significantly to 51.16% while the positional risk rises to $860. That’s a bad tradeoff (in my opinion) for such a small improvement in success ratios. So, if you must speculate on DOCU stock call spreads, the 100/110 may be your best bet.
