Sweet 16 betting could keep PENN moving higher
By:Tom Preston
With record betting on the Sweet 16 teams, it shows that no matter what else is happening in the country, Americans love our gaming. And online gaming stocks are benefiting.
Penn Entertainment (PENN), which runs ESPN’s online sportsbook, rallied over 6.1% yesterday. Investors probably acted on hopes that betting in March will translate into strong financials in Penn's earnings report in early May—and thereby help the company recover from its miserable report in February.
The dismal earnings reported in February sent PENN to its lowest price in four years.
PENN’s OTM calls are trading over equidistant OTM puts, indicating that the market sees further risk to the upside. That might be enough for a trader to consider a bullish strategy in it.
PENN’s implied volatility (IV) has been climbing with the approach of earnings, and its 58% overall IV and 54% IV rank make its options good candidates for short premium trades.
If you think PENN might continue to rally in the next few weeks and don’t want to take risk through earnings, the short 16 put in the April weekly expiration with 30 DTE is a bullish strategy that has an 89% prob of making 50% of its max potential profit before expiry—and that generates $1.34 of positive daily theta.
Tom Preston, tastylive chief market strategist, is responsible for the brokerage’s trading strategy, client-facing trading software and futures trading products. He contributes to Luckbox magazine and writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.
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