Freaky Fast Profits Portfolio (8/14/20) – DraftKings Reports

The profits were neither freaky nor fast this week, as my four accounts finished the week a combined grand total of $14 ahead of where we ended last week.

Today was a blah day, but we did make a couple moves. In NVDA, we bought back our expiring Aug 14 $510 call for $1, for a gain of $93. We then sold an Aug 21 $525 call for $222 credit. This is against our long Aug 21 $500 call that we previously purchased for $310. So now we’ve paid $310 in total, and sold $315 in options against it, which means the worst this position could do is be a $5 winner. The P+L chart now looks like this:

We will likely be selling this on Wednesday before the market closes and NVDA announces that it had another great quarter. A run to $500 or so before then would be very nice, and I’d use the proceeds to switch over to NVDA stock.

We also sold out of our JD options position for a loss of about $35. I wasn’t loving the action in the Chinese stocks lately, so I didn’t want to take the earnings gamble.

DraftKings reported this morning, and like I predicted, it absolutely crushed the quarter and offered enthusiastic forward guidance. However, traders sold it off because its earnings were lower than officially expected, which anyone with a brain in their head would have known coming in, given that there were no live sports for half of the quarter.

From the DraftKings Earnings Report:

As sporting events began to resume, the Company saw increased engagement with its sports-based product offerings, which contributed to sequential monthly revenue improvement during the second quarter. This positive momentum has accelerated with the return of MLB, the NBA, WNBA, the NHL, and MLS.

The Company is introducing fiscal year 2020 pro forma revenue guidance of $500 million to $540 million which equates to year-over-year pro forma revenue growth of 22% to 37% in the second half of 2020. This guidance assumes that the professional sports calendar remains as currently contemplated and that DraftKings operates in the states in which it is currently live. DraftKings at this time does not anticipate an impact to its long-term plans due to COVID-19.

DraftKings also has zero debt and is far and away the leader in daily fantasy sports, with first-mover advantages and a tremendously fun and engaging product.

I bought more at $33. We closed well ahead of where it was when I called it a screaming buy on Monday. Below on the hourly chart, you can see it performed solidly contending with and ultimately rising above the downtrend line.

I expect it to break higher some time next week, and make a run for the longer-term trendline on the daily chart, below, on its way to $50. My stop would be on a candle that does something that shouldn’t happen if it actually is bullish.

Lastly, I shorted ROKU at around $147. Why did I short ROKU? This isn’t some case where I’m pounding the table arguing that ROKU is going to $100. I’m not even arguing that ROKU is overpriced, because everything I own is overpriced by traditional price to earnings valuations. Things can stay overpriced on a P/E basis for a real long time (like AMZN has been for its entire life as a company) and let’s be honest here, how serious can a valuation model be which doesn’t take into account earnings growth or projected forward earnings growth? I love ROKU as a company too, and I was in it for its run from $130 to $160. So why am I short ROKU?

I’m short ROKU because ROKU trades like crap. I’m short ROKU because it traded like garbage after that move from $130 to $160, when it should’ve consolidated and resumed higher if it was going to trade like the other good growth stocks. I shorted it because it is woefully lagging its group. I shorted it because it sells off hard on every bad day for growth stocks, and I’ve got a lot of growth stocks, so it’s a nice little hedge. And this hourly chart is gross.

The daily chart isn’t much better. If it doesn’t work out and I have to cover this for a small loss, I’ll be happy, because that will mean that most of the rest of my portfolio is up big. $130 looks like a pretty reasonable landing spot if this falls.

That’s all for now! Questions or comments are welcome below.

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