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Resilient Trader
Resilient Trader is where smart traders come for vetted ideas.
Every week, we cut through the noise and surface opportunities that institutions are already eyeing, but with strategies tailored for retail traders. Today's setup? America's biggest online sportsbook just reported revenue down 5% and profit down 62%, spent $89 million more on marketing in one quarter to chase a product courts keep calling gambling, and 30 of 40 analysts still rate it a Buy. The report that tests all of it lands in nine days.
We'll cover:
Why DraftKings is a Short at $20.90 or better
Why the prediction-market push is a cost line, not a growth line, this year
How one defined-risk put spread plays the November 5 earnings report
🔍 Trade Thesis: The House Is Paying to Play
DraftKings makes money two ways: a sportsbook that keeps a slice of every bet, and online casino games in five states. Both engines sputtered last quarter. Revenue fell 5% to $1.44 billion, adjusted EBITDA fell 62% to $115 million, and the company swung to a $68 million net loss.
Management blamed bad luck and promotions: about $80 million of the shortfall came from "customer-friendly" sports outcomes (favorites won), the rest from marketing.
Behind the scenes:
🎰 The hold is shrinking: bettors wagered 14.5% more ($13.1 billion), but DraftKings kept 6.8% of it versus 8.7% a year earlier. Sports revenue fell 10.6%.
📣 Marketing jumped 38%: sales and marketing expense rose to $322.5 million from $233.2 million as the company spends the $200 million to $300 million its CEO budgeted this year for DraftKings Predictions, its prediction-market app. Jefferies expects another $100 million on top in the second half.
🎲 Online casino is losing share: iGaming revenue grew 7.5% while the regulated US online casino market grew about 17% in the quarter, per state data compiled by industry trackers.
⚖️ Courts are turning on the product: the Ninth Circuit in August and the Sixth Circuit on September 25 ruled that states can regulate sports event contracts as gambling. The Third Circuit went the other way in April, which sets up a Supreme Court fight. DraftKings offers sports contracts in 18 states, some of which ban sports betting.
$$DKNG ( ▼ 0.43% ) still guides to $700 million to $900 million of 2026 EBITDA, a range set in February and never touched. Consensus already sits near $667 million, below the floor. The research desk we follow models a third-quarter loss of roughly $100 million against a consensus loss near $49 million, and expects a substantial guidance cut on November 5.
The honest case against the short: the stock is already down 39% this year and 15% of the float is sold short, so a clean print could squeeze it. The same desk notes NFL Weeks 6 and 7 went the books' way, and CEO Jason Robins has said next year's prediction-market spending is more likely to fall than rise. Hence a defined-risk spread and a hard stop.
📊 Overview & Key Metrics
Metric | Figure |
|---|---|
Current Price | $20.78 (Oct. 27 close) |
Market Cap | About $10.3 billion |
Q2 Revenue | $1.44 billion (down 5%) |
Q2 Adjusted EBITDA | $115 million (vs. $301 million a year ago) |
Q2 Net Loss | $68 million (vs. a $158 million profit) |
Q2 Sales & Marketing | $322.5 million (up 38%) |
2026 EBITDA Guidance | $700 million to $900 million (consensus about $667 million) |
Cash / Debt (June 30) | $984 million / $1.83 billion |
52-Week Range | $18.35 to $36.98 |
Analyst Consensus | Moderate Buy (40 analysts), $32.98 average target |
📡 Market Sentiment & Fundamental Drivers
Analysts still rate the stock a Buy with a target 58% above the price, but they have been cutting all month: Truist to $26, Morgan Stanley to $31, Stifel to $32 and Canaccord to $40. Short interest is 15.1% of the float, up 3.7% in the latest reading, with 2.8 days to cover.
The driver is simple: hundreds of millions spent to lead a product whose legal status is being decided in court, while the two businesses that fund it decelerate. A guidance cut on November 5 would be the second in twelve months; DraftKings cut its 2025 revenue outlook at this same report a year ago.
📐 Technical Analysis
DKNG fell from $34.95 in January to $18.35 on October 16, then bounced 16% in seven sessions to Monday's high of $21.27. The bounce stalled under the 50-day moving average and Tuesday it closed down 2% at $20.78, after an early push to $21.14 failed under Monday's high: a bearish-trend stock rolling over from the top of its range before a binary report.
Moving Averages:
✅ Below the 50-day at $22.12, which capped the late-September rally and sits 6% overhead
✅ Far below the 200-day at $24.45, so the primary trend is down
✅ Just above the 20-day at $19.80, a bounce inside a downtrend, not a reversal
✅ RSI near 51, back to neutral, so the oversold reading from early October has been worked off
Key Levels:
Resistance: $21.30 (Monday's high), then $22.10 (the 50-day and the September 25 high)
Support: $19.80 (the 20-day), then $18.35 (the October 16 low), then $17.00 (our target)
The Setup: a downtrend, a 16% relief bounce that ran out of steam under the 50-day, and the quarter that tests the guide reported in nine days. We sell the bounce, not the dip: our entry is $20.90 or better, just under Monday's high, so with the stock at $20.78 we wait for a small rally into it. The put spread can be bought at today's price. Hard line above the 50-day.
🧠 SWOT & Who Should Take This Trade
Strengths: a top-two US sportsbook brand, 3.6 million monthly payers, $984 million of cash.
Weaknesses: a 62% profit decline, a 38% marketing jump, online casino share loss, and a guide the Street no longer believes.
Opportunities (for the short): a November 5 guidance cut, a Supreme Court case on sports contracts, 2027 estimates still 69% above 2026.
Threats (to the short): a bookmaker-friendly NFL stretch, a 15% short float that can squeeze, and a FanDuel print in mid-November that could lift the group.
Who should take this: traders who want a defined-risk bearish position into a specific date, and who know a short into earnings is a catalyst trade, not a position you hold for a year.
💥 Trade of the Week: Short the Bounce Into the Print
🔴 Stock Trade
Short $$DKNG ( ▼ 0.43% ) at $20.90 or better
🛡️ Options Play: Buy the January 15, 2027 $20/$17.50 Put Spread
Buy the Jan. 15, 2027 $20 Put
Sell the Jan. 15, 2027 $17.50 Put
Net debit: $1.10 or better ($110 per contract)
Why this structure: the November 5 report is a binary event, so this is defined risk only. Implied volatility is about 59%, which makes outright puts expensive, so we sell the $17.50 put to pay for about 40% of the position and cap the trade at our target. January 15 clears the report by ten weeks and FanDuel's mid-November print by two months; December cost $0.99 for the same spread, 11 cents less; we pay the extra for four more weeks past the FanDuel report and ten times the open interest at the $20 strike. (Quotes as of the October 27 close; closing bid-ask spreads run wide, so work the order near the midpoint and verify with live brokerage prices.)
Risk-Reward Breakdown - Jan. 15, 2027 $20/$17.50 Put Spread
Item | Figure |
|---|---|
Net Debit | $1.10 per share ($110 per contract) |
Max Risk | $110 per contract |
Max Reward | $1.40 per share ($140 per contract) |
Breakeven | $18.90 |
Return on Risk | 127% at $17.50 or below |
Days to Expiration | 80 |
Payoff Table - Jan. 15, 2027 $20/$17.50 Put Spread
DKNG at Expiration | Spread Value | Profit / Loss | Return |
|---|---|---|---|
$23.00 | $0.00 | -$110 | -100% (Stop) |
$20.90 | $0.00 | -$110 | -100% (Entry) |
$20.00 | $0.00 | -$110 | -100% |
$18.90 | $1.10 | $0 | 0% (Breakeven) |
$18.35 | $1.65 | +$55 | +50% (Oct. 16 Low) |
$17.50 | $2.50 | +$140 | +127% (Max Gain) |
$17.00 | $2.50 | +$140 | +127% (Target) |
$15.00 | $2.50 | +$140 | +127% |
How it works: you own the right to sell DKNG at $20 and have sold someone the right to sell it to you at $17.50. Every dollar DKNG falls between those strikes is yours, and your entire risk is the $110 you pay up front. The stock has to fall about 9% from Tuesday's close to break even, a level it closed below as recently as October 16.
🛑 Risk Management Tip
On the shares, a decisive close above $23 is the hard risk line. That is above the 50-day moving average and the September range, about 10% from our entry, and it would mean the bounce has become a trend change. Size at 1% to 2% of your account, and remember the November 5 report can gap the stock either way. On the spread your risk is capped, so buy only what you can afford to lose.
🚀 Catalysts to Watch
1. DraftKings Q3 Earnings (Thursday, November 5, after the close; call Friday, November 6, 8:30 AM ET) - the quarter that tests the $700 million guidance floor, with management's first framing of 2027.
2. Robinhood Earnings (October 27, after the close) - the other big retail name pushing into prediction markets; its event-contract numbers set the tone.
3. Flutter and FanDuel Q3 Report (mid-November; last year's came November 12) - the main rival's hold and spending numbers.
4. The Sports-Contract Court Fight - any Supreme Court move on the Third, Sixth and Ninth Circuit split, or a new state enforcement action.
5. NFL Results Every Sunday - when favorites win, the books keep less; the research desk we follow noted that Weeks 6 and 7 went the books' way.
📘 A note from the editor
If the options section at the end of each issue ever reads like a foreign language, you're not alone. Our sister company, Options Trading in 21 Days, put together a free beginner's guide that explains it all, from calls and puts to the Greeks and multi-leg spreads. Worth a read before the next trade. Get the free guide
🧠 Final Thoughts
Everyone can see DraftKings is down 39% this year. Fewer people look at why: it is spending like a startup to win a product two federal appeals courts just called gambling, while its casino business loses share and its sportsbook keeps less of every bet.
$$DKNG ( ▼ 0.43% ) still carries a guidance range the Street has stopped believing and 30 Buy ratings it has not earned this year. The November 5 report is where those two facts meet.
If the stock closes above $23, the bounce is a reversal and we step aside. If the guide comes down, the October low at $18.35 is the first stop and $17 is the target.
✅ Short DKNG at $20.90 or better
💸 Buy the Jan. 15, 2027 $20/$17.50 put spread for a $1.10 net debit
Every idea we publish is scored, win or lose, on our Idea Log. The way we build each setup is explained on our options trade ideas page.
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Disclaimer: This publication is for educational purposes only and is not investment advice. Options involve risk and are not suitable for all investors. Do your own research and consider consulting a licensed financial professional.
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