Interesting DKNG Put And Call Options For August 22nd

The article details potential options strategies for DraftKings Inc. (DKNG) stock, presenting two methods for income generation or cost basis reduction. Selling the $39.00 strike put, which is 5% out-of-the-money, offers a 29.39% annualized return if it expires worthless (66% probability), effectively lowering the acquisition cost for investors. Conversely, a covered call strategy using the $46.00 strike call, 12% out-of-the-money, could yield a 13.90% total return if assigned, or a 15.43% annualized premium if it expires worthless (67% probability). These strategies are highlighted against DKNG's implied volatilities of 51-53%, slightly above its 47% trailing 12-month actual volatility.

Analysis

The provided text outlines two specific option-based strategies for DraftKings (DKNG), leveraging its current option pricing and elevated implied volatility. For investors interested in acquiring the stock, selling the out-of-the-money $39.00 put contract presents a method to establish a position at a cost basis of $37.43, a notable discount from the current share price of $41.15. Alternatively, if the stock remains above $39.00, this strategy offers a 29.39% annualized yield on the cash commitment, with a 66% probability of this outcome. For existing shareholders, a covered call strategy at the $46.00 strike provides a potential 13.90% total return if the stock is called away, or an annualized yield boost of 15.43% from the premium if it expires worthless, an event with a 67% probability. A key factor enhancing the appeal of these income-generating strategies is that DKNG's implied volatility of 51-53% is currently higher than its 47% actual trailing twelve-month volatility, indicating that option premiums are relatively rich compared to the stock's recent historical price movements.

Key Decisions for Investors

• Investors with a bullish-to-neutral outlook on DKNG who are seeking a lower entry point could consider selling the $39.00 strike put, which either secures the stock at an effective cost basis of $37.43 or generates a 29.39% annualized yield.
• Current DKNG shareholders could evaluate writing the $46.00 strike covered call to generate income and achieve a 15.43% annualized premium boost, while accepting a cap on potential upside beyond the $46.00 strike price.
• Traders should recognize that the elevated implied volatility (51-53%) relative to historical volatility (47%) makes selling options attractive but also signals market expectations for larger price swings, which increases the risk of assignment on the put or having shares called away on the call.