Unusual Options Activity in TSLA stock, MSFT and DKNG

January 26, 2022

Hard to make out what was important or not in that Fed statement.

I would expect the unexpected for end of day.

The Fed took out the wording that said they would do anything and everything to help the market.

That is the "Fed Put."

Hmmm, the bears will latch on to that comment overnight.

Here's the Top3:

UNUSUAL OPTIONS ACTIVITY

1. A Different Way to Be Long DKNG

2. MSFT Earnings Crushes Options Traders

3. Watch These TSLA Levels After Earnings

Find your own ideas with the Unusual Options Activity Scanner

Let’s get started...


UNUSUAL OPTIONS ACTIVITY === STOCK

A Different Way to Be Long DKNG

DKNG Trade Idea

Morgan Stanley upgrades to overweight from equal weight, keeping its price target at $31.

“NY results on Friday remind us that the US sports betting/iGaming market is likely to be very large, with only a handful of market-share winners. We expect DKNG to be one of them, and with sentiment at an all-time low on near-term loss concerns, we see now as a good time to invest for the long term… Currently in every state that releases market share data, the top 5 operators have at least 82% combined share. ... Though there is a lot negative written about the levels of marketing and promotional spending, this has driven a very concentrated market that only players of scale can really compete in.”

So, they called the bottom here.

Maybe.

I do find it difficult to see the market reversing course and taking DKNG back up to 25-40x sales, when Wynn is trying to dump their online sports betting business because margins are razor thin.

What Does the DKNG Stock Chart Say?

DKNG Chart - Options Activity 012622

A stock that goes straight down like that usually has a capitulation at the end.

Without that, the climb should be much tougher.
The reason is that buyers are likely to have averaged all the way down. This lowers their cost and increases their shares. So, on the way up they have more shares to sell, which also means there needs to be a new big buyer taking stock.

I don’t suspect the Bears will retreat after this one day push higher on a Morgan upgrade.

They’ve been walking all over the Bulls here for some time.

The 50dma near $28 is probably an area they will try to defend.

The Bulls needed this as a start. They would like to see a close at the highs and another climb tomorrow, pushing toward the 50dma. If real buyers are coming back into the name, they will push through that level.

Options Activity in DKNG Stock

Unusual Options Activity Scanner DKNG 012622

The activity in DKNG is mixed. Call and Puts volumes in the weeklies are up and almost evenly distributed considering this big call out of Morgan Stanley.

With 3 Month Sentiment leaning Bearish (Blue is closer to the Bear side) and ATM Implied Volatility high, it may make sense to consider getting long through options as opposed to stock (if you are leaning that way).

I like the following trade better than owning stock:
Sell 1 DKNG April 14th $17.50 Put $1.44
Buy 1 DKNG April 14th $22.50 Call $3.25
Sell 1 DKNG April 14th $30 Call $1.20
Net-Net = $0.61 Debit

You have to commit to buying the stock below $17.50, or 20% below from here.

 The Call Spread’s maximum value is $7.50, which would give you $6.89 in profit.

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UNUSUAL OPTIONS ACTIVITY MSFT STOCK

MSFT Earnings Crushes Options Traders

MSFT posted a great quarter. CNBC has a great heat map of their business.

Unusual Options Activity MSFT Map 012622

Wall Street initially drove the stock lower on deceleration of QoQ growth in Azure. But the stock is now up 4% on the day.

What Does the MSFT Stock Chart Say?

MSFT Chart - Options Activity 012622

There’s a clear range established here between $280 and $350.

There should be some resistance near $320 and the 50dma at $325.

That 50dma will start to quickly move lower in the next few weeks.

The 200dma near $292 should give some support along with $280.

There’s been a decent amount of technical damage here in MSFT. So, until the distance between the 50dma and 200dma narrows I suspect we get a range bound trade in MSFT for a couple of months.

Options Activity in MSFT Stock

Unusual Options Activity Scanner MSFT 012622

The MSFT ATM Straddle went out at around $21 last night, which made it quite difficult to be long options into the announcement. Today, that straddle is worth around $15.50. Notice how the Implied Volatilities are all down. That’s the Implied Volatility Crush in effect today.

IV Crush is a concept every option buyer must understand in order to avoid it. Learn more by clicking here => What is IV Crush?

For those long-term holders in MSFT that have no intention to sell, I like the following “1x2” trade as an addition to that position:
Buy 1 March 18th $315 Calls $8.00
Sell 2 March 18th $330 Calls $3.70

Net-net = $0.60

Breakevens to the upside are $315.60 and $329.40. Anywhere between there at expiration and this trade is profitable. At $330 on expiration and you lose $0.60 on the trade but make ~$30 on the stock. Above $330 and you lose 1 for 1 with the stock; however, you will likely be able to get out of this trade at a profit before that ever happens.

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UNUSUAL OPTIONS ACTIVITY TSLA STOCK

Watch These TSLA Levels After Earnings

Unusual Options Activity TSLA 092321

Every TSLA earnings always seems to be the “most important earnings ever!”

The reality is that TSLA is a growing stock that has proven itself overtime.

Recent, monthly numbers have shown a thriving business.

The EV pie is getting bigger and bigger each year. TSLA will get their fair share.

Here’s the chart…

What Does the TSLA Stock Chart Say?

TSLA Chart - Options Activity 012622

The $900 - $1250 range looks solid, although there is a sneaky channel (dotted lines) I see forming which you should keep on the radar.

The market did hold that $900 on Monday with the rally and close above it.

I am still concerned about the distance between the 50 and 200dma. I suspect that will take several months to close, which could keep TSLA range bound.

The Bears have likely pared down their positions and will return near $1050 and $1100, with targets near $800.   

Options Activity in TSLA Stock

Unusual Options Activity Scanner TSLA 012622

The TSLA weekly ATM straddle is priced at ~$85. That makes the breakevens around $950 to be $865 and $1035.

The 1-standard deviation range is closer to $843.50 and $1,056.50. You can this range lines up very well with the graph.

 My opinion is that long TSLA calls into earnings here is a tough trade considering that I see good resistance and support right near these levels. Not saying you can’t make money… just saying that you are asking for a lot out of TSLA in this current market.

Click here if you need more options trading picks with in-depth analysis.

Now go make some money!

Best,
Felix

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