Shares of cryptocurrency mining company Marathon Digital Holdings (MARA) are down 77 percent in the past year, thanks largely to a decline in the price of Bitcoin. One trader is betting on a further decline through next year.
That’s based on the January 2024 $2.50 puts. With 571 days until expiration, 11,496 contracts traded hands compared to a prior open interest of 288, for a 40-fold rise in volume on the trade. The buyer of the puts paid $1.11 to make the trade.
Shares recently traded for about $7.00, so they would need to fall another $4.50 for the option to move in-the-money in the next 18 months. The stock has a 52-week low close to $6.
The company has been losing money, even with a 465 percent rise in revenue in the past year. That trend may reverse, as cryptocurrencies have been in a steep bear market for months, and may not resume their rally until Bitcoin’s next halving in 2024.
Action to take: Shares can certainly pop higher on a market rally, but the current downtrend in place is likely to continue. And if the company continues to lose money at the rate it’s burning cash, it may need to raise capital before these options expire. Traders should avoid shares for now.
For traders, the put options are an inexpensive way to bet on a further decline in crypto mining companies. Look for high-double-digit gains or better, and look to close out the trade well before expiration.
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.