Trade Alert - (DKNG) October 5, 2020

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

BUY DraftKings Inc. (DKNG) October 2020 $49-$52 in-the-money vertical BULL call spread at $2.55

Opening Trade

10-5-2020

expiration date: October 16, 2020

Portfolio weighting: 10%

Number of Contracts = 39 contracts

Fantasy sports and sports betting operator DraftKings (DKNG) said Monday it is offering 32 million shares in a syndicated deal, while gambling software maker GAN (GAN) announced a deal with Wynn Resorts (WYNN). DraftKings stock slid on the news and I am using this 7% drop to execute a short-dated call spread for the October 2020 expiration.

The trade will make money if it stays above $52 by October 16.

The DraftKings deal includes 16 million shares offered by the company and 16 million from some of its certain selling shareholders. The company will not receive any proceeds from the latter.

DraftKings plans to use proceeds from its own offering for general corporate purposes, it said in a written statement. Credit Suisse and Global Sachs are underwriting the deal.

Diluting the stock through vigorous share supply is one way to get more involved on the trade and why not when online sports betting has been one of the big winners of the pandemic as once sports finally came back online, albeit with empty stadiums, a furious inclination to bet on sports via online vehicles swept up the industry.

Online stock trading has experienced a similar type of renaissance with volumes skyrocketing.

I believe the risk/reward in this trade is worth dipping my toe back in the market.

Leading up to the election, markets are high risk and any drop near our upper call strike will be the signal to sell this position.

If you do not do options, then pass on this trade.

Here are the specific trades you need to execute this position:

Buy 39 October 2020 (DKNG) $49 calls at………….……$10.85

Sell short 39 October 2020 (DKNG) $52 calls at….…….$8.30

Net Cost:…….................………………..…….………..…….....$2.55

Potential Profit: $3.00- $2.55 = $.45

(39 X 100 X $.45) = $1,755 or 17.647% in 11 days

To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.

If you are uncertain on how to execute an options spread, please watch my training video by clicking here.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.

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