Shares of Bitcoin mining company Riot Blockchain (RIOT) has slid 90 percent from its highs. One trader sees the possibility for a further decline in the months ahead.
That’s based on the December $3.00 puts. With 182 days until expiration, 10,208 contracts traded compared to a prior open interest of 308, for a 33-fold increase in volume on the trade. The buyer of the puts paid $0.35 to get into the trade.
The stock recently traded for just under $5, so it would need to slide about another 20 percent for the option to move in-the-money. That’s a steep drop from a 52-week high over $46 per share.
Shares have taken a dive thanks to the drop in cryptocurrencies over the past few months. Yet the company’s operations have fared somewhat well, with revenue and earnings up by triple-digits.
Action to take: Shares will likely rally higher on a rebound in crypto prices. And the company’s balance sheet has more cash than debt, as well as a growing amount of mined crypto on its balance sheet. In time, that will make for a great return. Until that happens, however, shares will likely continue to slide.
For traders, the puts look attractive, as crypto will likely underperform over the next few months. The inexpensive puts could lead to mid-to-high double-digit gains in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.