Cryptocurrency investment platform Coinbase (COIN) has soared over 320% in the past year. One trader sees the potential for a pullback in the coming weeks.
That’s based on the August $150 puts. With 57 days until expiration, 6,102 contracts traded compared to a prior open interest of 312, for a 20-fold rise in volume on the trade. The buyer of the puts paid $1.65 to make the bearish bet.
Coinbase shares recently traded for about $245. Shares would need to drop about 39% in just under two months for the option to move in-the-money. However, a quick pullback could still lead to excellent returns on the trade.
Currently, Coinbase isn’t turning a profit, and shares trade for over 30 times forward earnings. However, thanks to rising interest in crypto trading, revenues have soared over 115% in the past 12 months.
Action to take: Shares have had a strong run over the past year, but the stock has been range-bound since March.
It’s likely that shares could pull back. Interested investors can likely buy shares in the low $200 range at some point over the coming months.
For traders, the August $150 puts are aggressive and unlikely to move in-the-money. But on a pullback for shares, they’re inexpensive enough to see mid-double-digit returns in a short period of time.
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 company mentioned in this article.