Shares of cryptocurrency miner Riot Blockchain (RIOT) have lost nearly three-quarters of their value in the past year, but have risen in recent sessions as cryptos have trended higher. One trader sees shares moving lower in the next month.
That’s based on the February $5 puts. With 35 days until expiration, 10,021 contracts traded compared to a prior open interest of 195, for a 51-fold rise in volume on the trade. The buyer of the puts paid $1.15.
Shares recently traded just under $5.50, so the option is already about $0.50 in-the-money. With a 52-week low of $3.25, set just in December, a pullback in the next month could lead to a big move higher for the put options.
The mining company has had to sell most of the crypto it’s been producing to cover its cash costs, and revenue is down 30 percent over the past year.
Action to take: Investors should hold off on buying shares until the outlook for crypto mining improves. That will happen when prices start to rise, which will likely be in the latter half of this year or even going into next year.
For traders, the February puts are attractive, as they can deliver high-double-digit returns or better in the coming weeks on a drop in shares. Traders looking for a riskier speculation may want to look at put options on Riot going out to June, such as the June $5 puts going for about $1.28.
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.