Bitcoin mining company Marathon Digital Holdings (MARA) is up 62% over the past year as bitcoin prices have trended higher. One trader expects shares to drop considerably in the coming months.
That’s based on the September $5.00 puts. With 136 days until expiration, 5,008 contracts traded compared to a prior open interest of 196, for a 26-fold rise in volume on the trade. The buyer of the puts paid $0.15 to make the bearish bet
Marathon recently traded for about $17.50. So the stock would need to slide by $12.00, or over 70%, in just over four months.
Shares would also need to break under their prior 52-week low just over $7.00.
Marathon’s share price is strongly correlated to movements in bitcoin. Shares have already slid nearly 50% from a high back in February, as bitcoin has pulled back over 20% from its peak.
However, bitcoin will likely see shares perk up in the coming months. That’s because bitcoin prices typically soar in the months after the halving.
Action to take: While the reward for mining has been cut in half, bitcoin miners remain profitable due to network demand. That suggests that Marathon may trend higher when bitcoin prices rise, not decline too much further.
Speculative investors may like shares on any big drops in the coming weeks, to profit from a big swing higher later in the year.
For traders, the September puts could see some quick short-term gains, potentially even triple-digit ones. But traders may want to switch to calls once bitcoin rallies again.
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.