Hey Trader,

Back before COVID, Penn National Gaming Inc (Ticker: PENN) bought Barstool Sports to improve the media reach and footprint for the run into online gaming.  I think PENN paid $500 million for Barstool in stock and cash.  The Barstool Sports franchise did not fit well with regulators so PENN sold Barstool back to Dave Portnoy for $1.  Regulators are happy and then PENN signs a deal with ESPN for online gaming. Meanwhile, Draftkings Inc (Ticker: DKNG) is worth 3x what PENN is.  Maybe because PENN just burned 500 mil.

Anyway, all of that drama is usually bad for a stock and leads to dead implied vols since no one knows what is up and is waiting for the dust to clear.

30, 60, and 90 Day IV for PENN

PENN IV is starting to exhibit some interesting patterns…

All the IVs are rising off a stock bottom

Note in the IV chart that volatility is rising across all terms.  PENN as a stock is clearly at the bottom of the range.  This is one of the few stocks below its pre-Covid levels so the take under of Barstool hurt this company for sure even though there is a longer-term payout associated with the deal.

This is the perfect wheel candidate right now.  PENN Jan 2024 20 puts yield 5% which is better than USGov treasuries at this point but more risk obviously.  PENN is also a play on the consumer which at this point every consumer stock is in the basement.  I would continue to play OTM put sales or 30-day 1 x 2 put spreads for credits with $20 as the short strike.

-AG