Hello Investors,
We are placing a “cash covered” (naked) put trade to potentially add a high growth stock to the portfolio. We find Draftkings (DKNG) as a compelling investment opportunity. We believe that the potential for it to grow as states legalize betting is enormous. While states like California recently voted down a proposal, they need the revenue and it is coming sooner rather than later. We are taking a conservative approach to owning the stock.
#1- We are selling way OTM on the puts. That gives us a very low potential cost basis ($21.00/share) if we acquire the stock at expiration.
#2- We are selling a little longer dated option (November) to collect more premium. While that gives the stock more time to go down. It also compensates us for a position we don’t mind holding for multiple months.
We sold the November 20th (monthly) 25.00 strike puts for +4.00 credit.
Happy Trading!