Back in December, I laid out a bullish thesis on Dexcom (DXCM) where we sold a Jan $80 Put for $4.50. Those options have expired worthless, and we collected 100% of the maximum gain and the stock has recently broken out above its trading range, I see a new opportunity to seek further upside exposure. After successfully capturing the premium from our January $80 puts, I’m now rolling those gains into a call spread while taking on no additional risk. DXCM remains well-positioned in the continuous glucose monitoring (CGM) market, where it continues to fend off competition and expand its leadership. As adoption increases and health-care trends favor more advanced diabetes management solutions, DXCM’s growth trajectory remains intact. The recent breakout and momentum suggests that the stock is on track toward our $110 target, making this an opportune time to re-engage with a new options trade structure. DXCM struggled to breakout from its bottoming formation and trading range between $65-$80 but recently cleared its $80 resistance and has since continued to rally. This breakout aligns with improving relative strength versus the S & P 500, highlighting increasing institutional interest. The next key level to watch is $91, which is the 200 Day Moving Average level before a potential move towards our $110 gap fill target level. While DXCM trades at a premium valuation, that can be justified by its significantly higher growth rates and superior profitability relative to industry peers. Trading at 44 times forward earnings, DXCM trades well above the industry average of 25 times, but this premium reflects its expected EPS growth of 23%, which is nearly three times the industry average of 8% . Similarly, Dexcom’s expected revenue growth of 14% outpaces the 6% industry average, further supporting its elevated valuation. Additionally, DXCM’s net margins of 17% exceed the 14% industry average, highlighting its operational efficiency. To capitalize on this breakout and earnings in 2 weeks (Feb 13 th ), we are rolling the profits from our Jan $80 short puts into a March 21, 2025, $90/$100 call vertical Spread, which costs only a $3.17 debit — fully covered by the $4.50 premium we previously collected. This trade entails: Buying March $90 Calls @ $4.9 Selling March $100 Calls @ $1.78 This structure provides the opportunity for a maximum reward of $683 per contract while taking on no additional risk. With DXCM’s strong price action this trade positions us for further upside with an attractive 2-to-1 risk to reward ratio. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
