Why DraftKings Stock Could Be a Bullish Play

The sports betting stock has several modes of support in place

Feb 23, 2024 at 1:34 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this DKNG commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

DraftKings Inc (NASDAQ:DKNG) stock staged a post-earnings reversal from the 20-day moving average and $42.25 level, which is a 50% retracement of its all-time highs and 2022 lows. With these levels of support in place, now looks like an opportune time to initiate a long position.

DKNG Feb23

Prior to the company’s fourth-quarter earnings report, five of the biggest open interest (OI) positions on DKNG were puts. Plus, a significant volume of overhead calls at the 45-strike and above expired on Friday, removing potential options-related resistance. Meanwhile, April’s implied volatility (IV) plunged 16%, a level that is on par with 63-day historical volatility (HV).
 
It’s also worth noting that shorts are still in covering mode, and that the 19.81 million shares sold short account for nearly 5% of the stock’s available float. Our call option has a leverage ratio of 6.5, and will double in a 15.4% move higher in the underlying security.

 

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