Shares of bitcoin miner Riot Blockchain (RIOT) are down 25% over the past year. One trader sees shares trending higher over the coming weeks.
That’s based on the October $5 calls. With 58 days until expiration, 5,977 contracts traded compared to a prior open interest of 107, for a 56-fold rise in volume on the trade. The buyer of the calls paid $3.25 to make the bullish bet.
Riot shares recently traded for about $8.00, making the options already about $3.00 in-the-money.
Shares are much closer to their 52-week low of $7.25 than their high of $18.75.
While bitcoin prices are higher over the past year, prices have languished since March. That’s caused the company’s revenues to show a 9% drop. Plus, rising energy costs have weighed on profitability for bitcoin mining.
Riot shares are likely to trend higher with bitcoin prices over time, rather than on any one quarter’s profitability.
Action to take: Given how far shares have been beaten down recently, there may be more upside than downside here. Bitcoin prices have been somewhat stuck in recent months, but demand remains strong, and bitcoin’s recent halving has cut the new supply of bitcoin in half.
For traders, the October $5 calls can likely see mid-double-digit profits at some point in the next few weeks. Since the option is deep in-the-money, traders looking for a bigger potential return may want to look at a strike price out-of-the-money.
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.