There are a lot of firsts at the Tokyo Summer Olympics; it’s the first Olympics with no spectators, and the first to have been delayed a year. It’s the first time karate, skateboarding, sport climbing, and surfing will be Olympic events, too.

The Tokyo Games are also the first Olympics that lots of Americans can legally bet on, thanks to the widespread adoption of sports betting.

Let’s put that into perspective: According to the American Gaming Association, an estimated 20.1 million Americans plan to bet on the Games – particularly basketball, soccer, and non-subjectively scored games – and nearly half of them plan to use widely available, legal options. Just two states, Delaware and North Carolina, put Olympic betting off limits.

I can already see a lot of institutional money moving into two U.S. betting stocks; legions of sports bettors eager to part with a dime are like catnip to smart money.

These are the two every investor needs to own this month – and one in particular I really like as a trade right now…

How to Cash In on Olympic Betting Fever

The first pick in this sector is Penn National Gaming Inc. (NASDAQ: PENN). Penn National operates 44 casinos and racetracks in the United States under the Hollywood Casino brand.

But since its $450 million acquisition of Barstool Sports last year, Penn is into sports betting at a 45-degree angle. Penn’s been focused on launching its sports-betting app in several states across the U.S.

And it’s a one-stop shop for many sports gamblers during the Tokyo Olympics in Pennsylvania, Michigan, Illinois, and Indiana, Penn’s four sports-betting markets.

Right now, Penn National is about 45% off of its 52-week high of $130. But the demand for Olympic sports betting could send this stock [back] into triple-digit territory, especially as sports betting continues to be legalized across the United States.

PENN is a great speculative flyer; take a small, sensible position and watch as it surges from Olympic sports gambling revenue.

But my absolute favorite stock in this space right now would be sports-betting operator Draftkings Inc. (NASDAQ: DKNG). DraftKings got its start in the U.S. fantasy sports niche, and now that betting is widely legal, it’s entered into partnerships with nearly every major U.S. and European sports league.

And it offers Olympics fans the opportunity to wager on dozens and dozens of events – even some of the really obscure ones.

Right now, DKNG shares trade for around $50, and the company has announced its intention to report earnings on Aug. 6 before the market open.

DraftKings is a fairly volatile stock, known to move $2 or $3, easily.

So I’ve got my eye on DKNG Aug. 6 2021 $50 calls, trading for a touch higher than $2.25 right now.

And earnings could help propel this $50-strike call even higher. I’d target a 100% gain on this trade, exiting for $4 or more if DKNG gets a pop.

If not, then I’d bail if shares drop below $48.

Remember – we’re after asymmetric returns. And I don’t want to lose any more than $1 to make $2. Risk less, make more – that’s the magic recipe of an asymmetrical trade.

— Mark Sebastian

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Source: Money Morning