Making A Bearish Trade

Had a wonderful dinner. Feeling extremely full. Going to watch a HK action movie later.

Whilst I have a bit of time, I start to ponder about next week’s positions and perhaps to initiate a new trade.

Made a number of rolling adjustments on Friday night to extend duration of existing option positions. Feeling the need to have the ‘extra time’ to be right. Managed to roll most (or all) for a small credit.

I try to cap the number of open positions to be more manageable. I may have room for one more open option position next week. Currently, overall beta-weighted delta of my portfolio is +7 (primarily attributable to a number of long stock positions). Hence, for my trade next week – I am looking at a negative delta trade.

I am considering a bearish directional trade in DraftKings Inc. (DKNG) which is a digital sports entertainment and gaming company that has been created to fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. DraftKings is the only U.S.-based vertically integrated sports betting operator.

Source: Finviz – breaches past the lower channel

Another perspective – seems to support for a bearish trade

For a bearish trade, given its low IV rank, one may consider a debit put spread. For debit spreads, I tend to limit my spread / risk to a width of $1. Say we are looking at short put (60) and long put (61) with 41D DTE, POP is not too bad at 63% and max profit is about 50% of max loss.

Nevertheless, one may need to take cognizance of DKNG’s upcoming earnings release. Positive earnings surprise may jumpstart DKNG into a bullish reversal.

DKNG will be looking to display strength as it nears its next earnings release, which is expected to be May 7, 2021. On that day, DKNG is projected to report earnings of -$0.50 per share, which would represent a year-over-year decline of 177.78%. Our most recent consensus estimate is calling for quarterly revenue of $221.65 million, up 150.34% from the year-ago period. Source: Zacks

Disclaimer: This is not an investment or trading advice / endorsement. Please refer to general disclaimer of this blog. If in doubt – please consult with your licensed financial planner / adviser.

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