Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Traders,
Legalized gambling has really changed the game for the casual sports fan.
I can only speak for my 20-something kids, but the discussion I hear when meeting them and their friends at sports bars these days is all about how much action they have on the games.
Well, it took a while but DraftKings Inc. (Ticker: DKNG) original slogan “Life is more fun with skin in the game” has finally caught on.
Talk about a rollercoaster ride – DKNG launched in 2020 at a price of $20 and traded as high as $72 just a year later. The next year, it traded as low as $12.
Well, it looks like momentum has turned up again and with the stock trading at $26.
The question is … should you put skin in the game or stay on the sidelines?
Today, I’ll lay out the game plan.
An MVP Year
DKNG is winning big in 2023 – they’re up over 80% and are trending higher.
Their Morningstar fair value price is $35, so they’re still trading at a 26% discount with open air above.
The stock is trending higher, and as we head into a strong bullish seasonal pattern for stocks in July, I could see it challenge the $35 fair value price.
DKNG Option Flow
DKNG option trading is very active, and we can gain some insight by analyzing its net put/call open interest at various strikes.
As you can see the dominant option flow is call buying and this is providing rocket fuel for the DKNG stock price.
That is why following option flow closely can give you an edge in the market.
So, what this graph reveals is that the $26 strike is powerful and because it holds the majority of option open interest DKNG stock may take a breather here.
What’s the Trade?
You may not have to chase DKNG higher right here. It may pullback back a bit, giving you an opportunity to purchase a call spread.
Consider a simple $1 dollar call spread that would offer an excellent low risk/high reward trade. On a pullback to maybe 24-25 something like a 27/28 call spread would probably cost close to $.30.
So, your maximum gross profit would be $1 minus $.30, which gives you a net profit of $.70 and a return of 280%.
That’s IF you want to have skin in DKNG’s game …
The bottom line is this stock has a ton of momentum, and with a new quarter starting next week, you may get an opportunity to get in on the cheap and out with a nice profit.
Live And Trade With Passion My Friends,
Bill Griffo