Cord cutting has been a concept for a long while. It still looms over the traditional media company stocks like a guillotine. A big part of it is the complete switch over to streaming content. FuboTV (NYSE:FUBO) is right there to profit from it. It’s no surprise to see FUBO stock a success already in such a short period of time.
The success of Netflix (NASDAQ:NFLX) solidified the fact that consumers want to stream everything. The pandemic jump-started all technology concepts. For example, telecommuting went from being a old fantasy to becoming “the” thing. The digital revolution is indeed in full bloom.
What ever you do, don’t look at the FUBO stock chart too far back. Statistically its all time high is above $22,000. This FuboTV went public last October so it inherited its old price action from the merger with FaceBank Group last April. Spending any time dissecting its fundamental financial metrics is a complete waste of effort.
For all intents and purposes, the company is a startup but far more than just an idea. We don’t need the proof of concept because it already is in motion.
FUBO Stock Is in the Right Spots
FUBO can take it to the next level because they could blend the best of two very lucrative worlds. With part of its business, they provide traditional cable content but through streaming. Current cord-cutters can subscribe and continue watching their beloved programs. I did that with YouTubeTV before FUBO was a thing. I would consider switching if I could convince my wife to go through the hassle.
In addition, FuboTV will excel in the world of sports. Management did an acquisition last December that could open the door to gambling. As we know, the “house always wins.” Gambling is an extremely profitable business especially when it’s electronic and efficiently. It’s virtually limitless. That’s why stocks like DraftKings (NASDAQ:DKNG) are so popular and in demand.
The decision over the future of FUBO stock is easy. This is one to own for the long term. The method to do this can vary but the concept is the same. Investors should not take an entire position at once because there are outside risks. The stock market in general is extremely high and under tough conditions. There is a gigantic artificial prop to it from the Fed and the White House. Inflation is creeping in and it could eventually hamper the QE efforts mid year.
Easing Into Positions Makes Sense
If the intention is to invest in FUBO stock then I should do so in several tranches. This would leave room to manage the risk after bad stints. Investors who use options can get long a stock while leaving buffers.
If I buy 100 shares of FUBO stock today I am risking $4,400 without any room for error. Instead of doing that, I can sell the FUBO August $20 put. This is a bullish position that results in a net $300 credit into my account.
If nothing happens or if the stock rallies then I miss out on owning shares. But I keep my $300 as profit out of thin air. This would be the equivalent of a 7% rally. If the stock crashes then I could own it 54% lower than today. In that case I wouldn’t even start losing money until it falls below $17. Someone who buys stock today would already be down 61% on their investment.
Selling puts sounds great except for the fact that I miss out on upside past what I collect. Owning FUBO stock is eventually the goal. Buying it near $40 per share makes technical sense as well. The bulls have been in charge of the price action and they’re buying the dips. Chasing it after the December rally was lunacy. Chasing it again into the GameStop (NYSE:GME) rally was a instant replay of said lunacy.
These super spikes temporarily damage the bull’s case because they create scars on the charts. Trending the ascent makes it easier to judge reasonable points of entry. FUBO stock has a solid base below $32 per share, and another one $7 higher. I can own some shares now with a clear conscience. I would add to them if it falls more than 20% in the next few months. Over the long term, I would build up my full position without exigent risk in the meantime.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.