The legal wager on Sunday’s Super Bowl LIX between the Philadelphia Eagles and the Kansas City Chiefs is anticipated to be at least $1.39 billion. This covers wagers such as which player will score a touchdown, who will win, and what color Gatorade will be dumped on the victorious coach.
However, bookmakers are highly skilled at forecasting the results of athletic events and developing precise betting lines because they have access to extensive datasets and previous comparisons. This indicates that casual gamblers are actually risking their hard-earned cash on improbable results.
For instance, the Chiefs tight end Travis Kelce is a popular pick this season to score the game’s first touchdown. On DraftKings Sportsbook, the odds for that wager are +1000.
A favorite is denoted by a minus sign or “-” and an underdog by a plus sign or “+”. In addition to receiving their money back, a $100 wager on a +1000 option, for instance, would yield a $1,000 profit. Anything with odds of -190, such as Eagles running back Saquon Barkley scoring a touchdown at any time during the game, would require a $190 wager for favorites to win $100.
Given that Kelce has a 10 to 1 chance of scoring the Super Bowl’s first touchdown, it might be wiser to wager on DraftKings Inc.’s stock (DKNG) increasing from $42.50 to $50 by March 7.
Which is riskier, placing a wager on DraftKings’ stock to keep rising or on Taylor Swift’s boyfriend to score in the Super Bowl?
States now have the authority to enact laws allowing sports betting after the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) in 2018. Currently, sports betting is legal in 38 states and Washington, D.C., in one way or another.
DraftKings and FanDuel (a division of Flutter Entertainment PLC (FLUT)) account for the majority of app downloads and total wagering money among sportsbooks, despite the fact that there are other competitors in the sports betting market.
According to Bill Miller, the CEO of the American Gaming Association, “no single event unites sports fans like the Super Bowl,” reported MarketWatch.
The Super Bowl has long been the most heavily favored sporting event in the United States. Although the NCAA men’s college basketball tournament has occasionally seen higher wagering than the Super Bowl, March Madness consists of dozens of games spread over several weeks as opposed to Super Bowl Sunday, which is a single event.
A less hazardous wager with stock options
However, investing in DraftKings’ stock may be less hazardous than wagering on a particular Super Bowl event or the outcome of the match.
What if you think DraftKings’ stock price will continue to rise? Considering the company’s strong prominence, particularly in the lead-up to Super Bowl weekend, this could not be out of the question.
Purchasing the stock is the simplest method to “bet” on it. Eighty-six percent of the 37 analysts surveyed by FactSet who cover the stock and work for brokerage companies or research firms give it a buy rating. The 12-month price objective set by analysts is $52.33, which is 23% higher than the stock’s early Friday morning price of $42.50.
However, what if you feel that an investment choice based on a 12-month aim isn’t sufficiently aggressive? What if you thought the share price will increase to $50 in the upcoming month?
If your upward call proves to be accurate, you could trade call options on DraftKings in the hopes of making a faster profit. Until the option expires, a call option grants you the right to purchase a stock at a certain price, known as the strike price.
FactSet data showed that as of early Friday, $42 DraftKings options with a March 7 expiration date were trading for $3.15.
Options are offered for sale in 100-share quantities. For a lot of 100 shares, the call option with a $42 strike that expires on March 7 would cost you $315.
Thus, you would be taking a $315 risk in the first example. If the stock were trading above the $42 strike price, you may buy the 100 DraftKings shares by March 7 in order to exercise your option. This option would be regarded as “in the money,” as you paid $3.15 for the $42 March 7 call, when the strike price was lower than the current price.
You may exercise the option for $42 if the stock increased to $50 before March 7 at that point in time. Therefore, the 100 shares would cost $4,200, and you would sell them right away for $5,000. After deducting the $315 option premium from the $800 gain, the cash would be $485.
In this case, you would benefit if the stock increased to a price over $45.15 (the strike price + your $3.15 premium).
Because the strike price was lower than the current share price in our first example of a DraftKings options trade, you would already be in the money.
However, a greater strike price can come with a lesser premium. Let’s say you were certain that the stock would at least reach $45, but you still anticipated it would reach $50 in a month.
DraftKings options for $45 that expire on March 7 were selling for $1.70 early on Friday.
Therefore, the round lot of 100 DraftKings options would cost $170. You may exercise the option at $45 if the stock increased to $50 by March 7. The 100 shares would cost $4,500, and you would sell them right away for $5,000. You would deduct the $170 option premium from the $500 gain, leaving $330 in profits.
Based on the data, the options trades may be less hazardous than some wagers on the game or contest events, even though we are unable to measure the probabilities.
Because the broker effectively offers credit to options traders, who would then need to put up cash to exercise the options, trading options requires a brokerage account with a margin account.
