Speculators seeking a quick score should keep fuboTV (NYSE:FUBO) on their radar. Presently, FUBO stock is printing a “7-3” sequence: seven weeks of upside mixed with three weeks of downside, with a net negative trajectory across the period.

It’s a rare pattern, having only materialized twice since FUBO’s public market debut. In every case, the next week’s price action resulted in upside, with a median return of 21.14%.

Granted, this figure needs to be taken with a huge grain of salt. Since we’re only talking about two datapoints, we cannot make too many assumptions. Still, what’s intriguing is that the 7-3 sequence with a net positive trajectory also favors the bulls. In 61.54% of cases following this particular iteration, FUBO stock generated a positive return in the subsequent week, with a median performance of 12.98%.

Quantitatively, then, bullish traders have an incentive to bet on FUBO due to the hot deck. In any given week, the chances that FUBO will rise is only about 44%. While speculators have made serious money with this security, the problem is that the timing needs to be fortuitous. Otherwise, as a penny stock, FUBO is liable to cause damage.

However, the good news is that the probabilities of long-side success is not 44% across all sentiment regimes. In other words, certain cycles (such as the 7-3 sequence) feature probabilities that are substantially greater than the baseline. And that’s the power of the quantitative approach versus any other methodology — we’re dealing with practical frameworks rather than subjective storylines.

Plotting an Aggressive Strategy for FUBO Stock
Under any normal circumstance, taking a shot on FUBO stock would be considered extremely risky. Again, with a 44% long-side success ratio, you’re likelier to lose than to win. However, because of the flashing of the rare 7-3 sequence, those with some loose pocket change could potentially put this risk capital to use.

Should the bulls control the market, it would not be unreasonable for FUBO stock to reach $3.25 within the next few weeks — and possibly even more. With this in mind, speculators have two basic approaches available.

First, the most straightforward mechanism of speculation is to acquire FUBO stock in the open market. Again, if the bulls dominate proceedings, investors can possibly enjoy double-digit returns in a matter of weeks.

Second, a more aggressive but rewarding methodology is to use multi-leg option strategies. Specifically, one might consider the 3/3.50 bull call spread expiring June 6. This transaction involves buying the $3 call and simultaneously selling the $3.50 call, for a net debit paid of $15. If FUBO stock rises through the short strike price at expiration, the maximum reward is $35, a payout of over 233%.

Granted, this is arguably the most aggressive trade available for the June 6 options chain but it’s not completely irrational. Mathematically, market makers have assigned a very low odds of success for this trade; hence, the massive payout. Nevertheless, the response to the 7-3 sequence suggests that market makers could be underpricing these derivatives, believe it or not.

This is yet another reason why you’ll want to keep close tabs on FUBO stock over the coming days.

— Josh Enomoto

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Source: Money Morning