How To Play Pin the Tail On the Option Expiration Donkey: Handicapping DKNG For A Big Payoff

September 18, 2020
/ By Jeff Cooper

I don’t know why they ring a bell at the beginning and the end of trading… when there is after hours and pre-market trading.

Be that as it may, there is often a lot of “tape-painting” and misdirection going on pre-market.

For example, DKNG has been on fire.

It is up from 37 to 53 going into Wednesday.

Thursday premarket it was trading down to 48.50-49 in sympathy with the futures getting hit.

Clearly DKNG was entitled to a profit-taking pullback.

So why did I call an audible on the Hit & Run private Twitter feed for subscribers to take DKNG long as it was getting whacked pre-market rather than wait for the dust to settle and “see what it would do?”

For two reasons. DKNG was in a Lock Out Rally, a runaway move.

Lock Out Rallies by definition don’t accommodate those waiting for the train to pull back into the station.

Secondly, DKNG was pulling back to a picture perfect gapfil into Wednesday morning’s open gap.

From my perch, it looked like a misdirection flush-out.

Of course, DKNG could had crushed the open gap diving lower.

It also could have sat there.

But this is a game of odds and inches.

The risk to reward setup into Wednesday’s gap was compelling and momentum begets momentum.

As well, as flagged to members on Wednesday, it looked like DKNG was on a trajectory/agenda to its 55 strike for Friday’s weekly opex.

That was the crux of the setup. A Pin the Tail On the Option Expiration Donkey play.

The 50 calls were crushed, setting up a play to buy the 50 strike calls for today on the cheap.

After triggering an Opening Range Breakout (ORB) and a Jump the Creek long setup (offsetting the opening down gap, DNKG exploded from the 48 region up to over 54 in less than two hours).

How To Play Pin the Tail On the Option Expiration Donkey: Handicapping DKNG For A Big Payoff

Leave a Comment:

Popular posts

How to Use the VIX Curve to Judge the Market’s Mood

Sami’s Swing Trading Blueprint: April 29, 2018

What’s On Tap for Traders: April 24-29

Why Is Bitcoin Moving? T3 Live Readers Sound Off!