Making a Trade with DraftKings (DKNG) for a Quick $378 in Income (44.8% Annualized Yield)

by  • 

I’m alerting you to an income trade I just made with DraftKings (DKNG) this morning.

At the time I made my trade, DraftKings was selling for $42.83 per share and the January 15, 2021, $35 puts were going for around $3.70 per share.

My trade involved selling one of these puts, and it got filled at $3.78 per share. There are two probable ways this trade will work out…

Scenario 1: DraftKings falls below $35 by January 15, 2021
If DraftKings falls below $35 by January 15, I may be obligated to buy 100 shares at $35 per share.

In exchange for my agreement, I was paid an instant $378 (100 shares X $3.78 per share).

This money was immediately deposited into my 401(k) retirement account, where I made the trade.

Taking this income into consideration, my cost-basis drops to $31.22 per share.

Premium Content

That’s a 27.1% discount to the $43.83 share price that DraftKings was selling for at the time I made this trade.

Scenario 2: DraftKings stays above $35 by January 15, 2021
If DKNG stays above $35 by January 15 — and it does have price support at $35 — the contract expires worthless and I get to keep the $378 in income.

This works out to a 10.8% return on what my purchase obligation would have been ($3.78 / $35) in 88 days.

If I can repeat these results over the period of a year I could generate an 44.8% yield from DraftKings without even buying shares.

Greg Patrick
TradesOfTheDay.com

P.S. When it comes to selling puts, I’ve developed a few rules that fit my portfolio objectives. I only sell a put option if:

  1. I want to own the underlying stock anyways
  2. I’ll be buying the stock at a reasonable price (which is typically fair value or better)
  3. The strike price of the option I’m selling is At-The-Money (ATM) or Out-of-The-Money (OTM)
  4. I’m comfortable owning the stock for the long-haul in case the price drops significantly below my strike price
  5. I’m comfortable “letting the stock get away from me” if I don’t get “put” shares and the stock takes off
  6. My position-sizing makes sense if I’m “put” the shares
  7. I can make the trade in a retirement account, such as an IRA or 401(k) to minimize taxes and tax paperwork. 
[stextbox id=”info”]Please keep in mind that these trade alerts are for information purposes only. We’re not registered financial advisors and these aren’t specific trade recommendations for you as an individual. Each of our readers have different financial situations, risk tolerance, goals, time frames, etc. The ideas we publish are simply ideas that we feel fit our specific needs and that we’re personally making in our own portfolios. You should also be aware that some of the trade details (specifically stock prices and options premiums) are certain to change from the time we make our trade to the time you’re alerted about it. So please don’t attempt to make this “High-Yield Trade” yourself without first doing your own due diligence and research.[/stextbox]
Premium Content