DraftKings Stock Moves Lower Ahead of Earnings

The security has a fairly negative post-earnings history

Deputy Editor
Aug 4, 2022 at 11:39 AM
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The shares of DraftKings Inc. (NASDAQ: DKNG) are in focus this morning, as the sports gambling staple prepares to step into the earnings confessional. At last check, DKNG was down 3.7% to trade at $16.20, ahead of the company's second-quarter earnings report, due out before the market opens tomorrow, Aug. 5.  

Bullish options traders are kicking it into high gear ahead of the event. So far, 63,000 calls have crossed the tape -- triple the average intraday amount -- against just 18,000 puts. The most popular contract is the 8/5 19-strike call, followed by the 17-strike put in the same weekly series, with positions being opened at both.  

This penchant for bullish bets is unusual, especially amongst short-term options traders. DraftKings stock sports a Schaeffer's put/call open interest ratio (SOIR) or 0.95, which ranks higher than 99% of annual readings and implies puts have been more popular than usual.

DKNG has a negative history of post-earnings moves, with positive returns after only three of its last eight reports. In fact, the equity managed to move lower in its last three post-earnings sessions. DraftKings stock has averaged a next-day swing of 7.3% during this time period, regardless of direction. This time around, the options pits are pricing in a much bigger move of 16.3%. 

On the charts, the security has trended lower for the better part of the last 12 months, now sporting a 67% year-over-year deficit. Pressure from the 150-day moving average has weighed for much of that time, and the trendline yesterday thwarted DKNG's rally attempt near the $17 level.

DKNG Chart August 4

There's some decent short-covering potential with DKNG that could help it topple some of the resistance that has gathered. Short interest is up 4.7% in the most recent reporting period, and the 40.10 million shares sold short accounts for a healthy 9.9% of the stock's total available float.

 

 

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