With the calendar flipping to 2025 and the long holiday weeks/weekends behind us, most traders will be back at their desks starting yesterday. Let the fun begin!
The Stock – Rubrik (RBRK)
Rubrik certainly has the qualities of a new leader that’s bound to get much bigger if management continues to make the right moves. The firm is a new kind of cybersecurity outfit, with the story here revolving around the growing realization and acceptance that cyberattacks and breaches are inevitable in some sense given the increasing complexity of attacks and bad actors (indeed, the frequency and cost of attacks have only increased despite better protections).
Thus, while prevention is obviously a huge priority and will always be necessary, one of the new focuses is on what’s called cyber resilience, which involves both data security efforts and, more importantly, cyber recovery, so that businesses that have been breached can recover their data very quickly (often within hours) and get back up and running … hence slashing the effective cost of these events.
The firm is also a leader in what it dubs data security posture management (DSPM for short), which helps protect sensitive data in cloud environments, often thanks to AI—Rubrik, in fact, is the only player in the market to offer DSPM (deals for which doubled quarter over quarter in Q3) and cyber recovery in one integrated platform, which is a reason why the top brass says it’s winning the vast majority of competitive deals it’s in on.
As for the numbers, sales here have been growing fast and even accelerating in recent quarters, while subscription annualized recurring revenue moved above $1 billion in Q3 (up 38%) and same-customer revenue growth was north of 20%. Moreover, while earnings are still clearly in the red, free cash flow was positive in the quarter. Sponsorship is still developing but is ramping fast (39 funds owned shares in June, rising to 202 funds at year end), a trend that should continue should Rubrik remain in the lead in this new field.
Technical Analysis
RBRK spent nearly the first six months as a public company building a reasonable (29% deep) base before flashing some major accumulation in October, surging to 50 in November and then gapping up in a big way after earnings in early December. As with everything else, the stock has pulled in since then, but it looks reasonable, “only” falling to the 25-day line after three weeks of rest. We like the overall action. Stop – 56
The Covered Call Trade
Buy Rubrik (RBRK) Stock at 68, Sell to Open February 70 Strike Calls (exp. 2/21) for $3.50, or a Net Price of 64.5 or less
Static Return: $350 per covered call (5.42%)
Breakeven: 64.5
Covered Call Return (if assigned): $550 per covered call (8.52%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, or 64.5 or less. (In this case 68 minus 3.50 = 64.5. Or another example is you could pay 68.5 for the stock and sell the call for 4, which also equals 64.5)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| American Airlines (AAL) | 18 | 16.85 | 14.4 | January 18 -- $0.90 | $0.50 |
| SoFi Technologies (SOFI) | 16.4 | 15.6 | 13.3 | January 17 -- $1.15 | $0.20 |
The next Cabot Profit Booster issue will be published on January 14, 2025.
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