MW Thinking about a Super Bowl bet? DraftKings stock may be a less risky gamble than a Travis Kelce touchdown.

By Weston Blasi and Philip van Doorn

Here are three ways to trade DraftKings' stock, instead of gambling on the Super Bowl

At least $1.39 billion is expected to be legally wagered on Super Bowl LIX between the Philadelphia Eagles and the Kansas City Chiefs this Sunday. That includes bets like who will win, which players will score a touchdown and what color Gatorade will be poured on the winning coach.

But sportsbooks, armed with large datasets and historical comparisons, are quite good at predicting the outcomes of sporting events and creating accurate betting lines. This means casual bettors are truly gambling their hard-earned money on uncertain outcomes.

One popular bet this year, for example, is that Chiefs tight end Travis Kelce will score the first touchdown of the game. Odds for that wager are +1000 on DraftKings Sportsbook.

A minus sign or "-" symbol indicates a favorite, and a plus sign or "+" symbol indicates an underdog. For example, a $100 bet placed on a +1000 choice would net a $1,000 profit, in addition to getting back the original $100. For favorites, it would take a $190 bet to win $100 on something with the odds of -190, like Eagles running back Saquon Barkley scoring a touchdown at any point in the game.

Considering that the odds of Kelce scoring the first touchdown of the Super Bowl are 10 to 1, you might be better off placing a bet on DraftKings Inc.'s stock (DKNG) rising from its current price of $42.50 to $50 by March 7.

So what's more risky - betting on Taylor Swift's boyfriend to score in the Super Bowl, or wagering that DraftKings' stock will continue its rise?

When the Supreme Court ended the Professional and Amateur Sports Protection Act (PASPA) in 2018, it gave states individual legislative power to legalize sports betting. Some 38 states plus Washington, D.C. now allow some form of either in-person or online sports betting.

While there are other players in the sports-betting space, DraftKings and FanDuel (a unit of Flutter Entertainment PLC (FLUT)) represent a majority of the app downloads and total money accepted via wagers among sportsbooks.

"No single event unites sports fans like the Super Bowl," Bill Miller, the American Gaming Association's chief executive, told MarketWatch.

For years, the Super Bowl has been the most bet-on single sporting event in the U.S. each year. The NCAA men's college basketball tournament has at times had more money wagered than the Super Bowl, but March Madness spans dozens of games over multiple weeks versus the single event that is Super Bowl Sunday.

A lower-risk bet with stock options

Yet an investment in DraftKings' stock might be less risky than gambling on a specific event taking place during the Super Bowl, or on the result of the game.

What if you expect the price of DraftKings' stock to rise from here? This might not be unreasonable considering how high the company's profile is, especially heading into Super Bowl weekend.

The easiest way to "bet" on the stock is to buy it. Among the 37 analysts working for brokerage firms or research firms covering the stock and polled by FactSet, 86% rate the stock a buy. The analysts' consensus 12-month price target is $52.33, which is 23% higher than the stock's price of $42.50 late Thursday morning.

But what if an investment decision based on a 12-month target isn't aggressive enough for you? What if you expected the share price to rise to $50 over the next month?

You could trade call options on DraftKings, hoping for a quicker profit if your upside call turns out to be correct. A call option gives you the right to buy a stock at a specified price (called the strike price) until the option expires.

Option example 1: In the money

On Thursday, $42 DraftKings options expiring March 7 were trading for $3.

Options are sold in lots of 100 shares. So the call option expiring March 7 with a $42 strike would cost you $300 for a 100-share lot.

So in this first example, you would be risking $300. You could exercise your option by purchasing the 100 shares of DraftKings by March 7, but you would only do so if the stock were trading above the $42 strike price. This option would be considered "in the money," because the strike price was below the current price when you paid $3 for the $42 March 7 call.

If the stock rose to $50 before March 7, at that moment when it was trading for $50, you could exercise the option at $42. So it would cost $4,200 for the 100 shares, which you would immediately sell for $5,000. The gain would be $800, from which you would subtract the option premium of $300, for proceeds of $500.

Option example 2: Out of the money

In our first example of a DraftKings options trade, you would already be in the money because the strike price was below the current share price.

But you could pay a lower premium for a higher strike price. Let's say you still expected the stock to rise to $50 within a month, but were confident it would at least rise to $45.

On Thursday, $45 DraftKings options expiring March 7 were trading for $1.62.

So you would pay $162 for the round lot of 100 DraftKings options. If the stock rose to $50 before March 7, you could exercise the option at $45. You would pay $4,500 for the 100 shares, which you would immediately sell for $5,000. The gain would be $500, from which you would subtract the option premium of $162, for proceeds of $338.

Although we cannot quantify the odds for the options trades, based on the numbers, the trades might be less risky than specific bets on the game or events taking place during the contest.

To trade options, you need to have a brokerage account with a margin account, because the broker in effect extends credit to options traders, who would have to put up cash to exercise the options.

-Weston Blasi -Philip van Doorn

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February 06, 2025 13:06 ET (18:06 GMT)

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