Sports gaming site DraftKings (DKNG) is up 39% in the past year, beating the overall returns of the stock market. One trader sees shares trending higher in the coming weeks.
That’s based on the July 5 $36 calls. With 30 days until expiration, 11,050 contracts traded compared to a prior open interest of 119, for a 93-fold rise in volume on the trade. The buyer of the calls paid $1.57 to make the bullish bet.
DraftKings shares recently traded for about $35.50, making this an at-the-money trade. Shares are well off their 52-week high of $49.57, set back in March.
While DraftKings is still unprofitable overall, the business is performing well. Revenues are up 53% in the past year. And the company has ample cash on the balance sheet to avoid having to raise capital anytime soon.
Action to take: Shares have just had a sizeable pullback and look heavily oversold in the short-term. Investors may like shares here as a contrarian buy, but it may be prudent to wait for a few sessions to ensure that the stock can reverse higher from here.
For traders, the July $36 calls are inexpensive, and offer high double-digit returns for a bounce higher in shares over the coming weeks. Traders may want to take quick profits on any short-term bounce higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.