Options Bulls Cheer on DKNG After Election

The equity is set to snap a four-week losing streak

Digital Content Manager
Nov 5, 2020 at 12:57 PM
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Below is a list of 20 stocks that have attracted the highest weekly options volume in the last 10 trading days, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, with highlighted names new to the list. One particularly topical name on the list is sports betting concern DraftKings Inc (NASDAQ:DKNG). Earlier this week, three new U.S. states, Maryland, South Dakota, and Louisiana, voted in favor of sports betting, while Nebraska also approved a major gaming expansion, which could lead to legalized sports betting in the state as well. 

This decision has been huge for DKNG stock, which has been back in rally mode since Tuesday. The security is now butting back up against its 20-day moving average, which helped guide DKNG away from its Oct. 2 record peak of $64.19. The stock was last seen up 6% at $41.82, set to snap a four-week losing streak, should these gains hold. 

DKNG Chart Nov 5

Circling back to White's data, DraftKing's options pits were buzzing ahead of the Tuesday night decision. In the past 10 days, 664,754 calls and 295,879 puts were exchanged. Today's activity is also quite bullish, with calls being picked up at a slightly quicker clip than usual. At last glance, 107,000 calls had exchanged hands, which is 1.2 times the intraday average, and over three times the number of puts exchanged in the same time period. The weekly 11/6 42-strike call is the most popular, and it appears that positions are being bought to open here.

Most Active Options Nov 5

Analysts have yet to comment on the newly passed legislation, though the security could be ripe for some upgrades, should this positive price action continue. Of the 17 in coverage, five still call DKNG a "hold." On the other hand, the 12-month consensus price target of $58.74 is a 38.6% premium to current levels. 

For those who haven't gotten in on DKNG's rebound just yet, options might be the way to go. The security's Schaeffer's Volatility Index (SVI) of 105% stands higher than only 21% of readings from the past 12 months. This means options players are pricing in relatively low volatility expectations at the moment. 

 

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