Normally, I avoid highly speculative companies (such as DraftKings), but I do occasionally allow myself to establish one such position in the Covered Calls Advisor Portfolio. On the downside, DraftKings' continues to lose money in each quarterly earnings, largely because of the huge marketing expense required to attract new customers in the U.S. States that are continuing to approve online sports gambling. But they have now established themselves as one of the few likely long-term winners in the growing sports betting business.
Their Trailing Twelve Months Price-to-Enterprise Value multiple has now declined to an attractive level now below 4.0. The Implied Volatility of the DraftKings Calls was very high today at 98.0 when this position was established, so the options premium received (and therefore also the 103.3% potential annualized-return-on-investment) are very attractive. The current average target price of the 30 Wall Street analysts currently covering DraftKings is $25.87 (+80.4% above today's purchase price). The probability that the position will be assigned at expiration is approximately 70.5%. There is no ex-dividend and no earnings report prior to the options expiration date.
Some key numbers for this DraftKings Inc. Covered Calls position are:
Covered Calls Net Investment: $9,869.36
Profit if Assigned on Expiration Date: $530.64
Days Until October 28th, 2022 Options Expiration: 19
Absolute Return-on-Investment if Assigned at Expiration: +5.4%
Annualized Return-on-Investment if Assigned at Expiration: +103.3%
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net
