DraftKings (DKNG) stock continues to display relative strength in the market and has recently been added to the SwingTrader portfolio. As a leading online sportsbook, digital casino, and daily fantasy sports operator, DraftKings was also recently recognized as the IBD Stock Of The Day, riding March Madness to a proper buy point. To capitalize on this momentum, traders are exploring cash-secured put trades on DKNG stock.
A cash-secured put strategy involves writing an at-the-money or out-of-the-money put option while setting aside enough cash to purchase the stock if necessary. By selling an April 19-expiration put option with a 42.50 strike price, traders can generate around $150 in premium, with a break-even price of 41.00. This strategy offers traders a way to potentially acquire DKNG stock below the current market price, with a risk-return profile that includes a 3.66% return and a maximum loss if the stock falls to zero.
Investors must be aware of the risks associated with options trading and the potential loss of 100% of their investment. Cash-secured puts can be a valuable tool for generating income on stocks the trader is willing to own, such as in the case of DraftKings (DKNG) stock. With a Composite Rating of 86 and a Relative Strength Rating of 96, DKNG stock remains a strong contender in its group, making it an attractive option for traders looking to leverage its leadership qualities in the market.