Bitcoin's rally could keep COIN moving higher
By:Tom Preston
Bitcoin is hitting all-time highs and signaling that it’s finally being accepted as an asset class.
United Kingdom regulators are allowing trading in crypto-backed securities, which could mean more money flowing into bitcoin. And, with another bitcoin “halving” taking place in April, its price could keep on rising.
Coinbase (COIN), the largest U.S. crypto exchange, is going along for the ride, reaching its highest price in over two years. The more crypto trading volume there is, the better it is for COIN.
COIN’s OTM calls are trading over equidistant OTM puts, indicating that the market sees risks to the upside. All that might be enough for a trader to consider a bullish strategy in it. COIN’s implied volatility (IV) has been climbing even as the stock’s rallied, and its 103% overall IV and 44% IV rank make its options good candidates for short premium trades.
If you think COIN might continue to rally in the next few weeks, the short put vertical that’s long the 210 put and short the 215 put in the April weekly expiration with 31 days to expiration, is a bullish strategy. It collects a credit 1/3 the width of its strikes, has an 80% probability of making 50% of its maximum potential profit before expiry, and that generates $2.43 of positive daily theta.
Tom Preston, tastylive chief market strategist, is responsible for the brokerge’s trading strategy, client-facing trading software and futures trading products. He contributes to Luckbox magazine and writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.
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