Bitcoin mining company Riot Platforms (RIOT) is up 18% year-to-date, beating the overall market and performing strongly as cryptocurrency prices rise. One trader sees shares trending higher in the months ahead.
That’s based on the May $22 calls. With 87 days until expiration, 20,174 contracts traded compared to a prior open interest of 736, for a 27-fold rise in volume on the trade. The buyer of the calls paid $0.37 to make the bullish bet.
Riot shares recently traded for about $12, meaning the stock would need to rally by $10, or a massive 83% for the stock to move in-the-money. The strike price is also well over Riot’s 52-week high of $18.36.
Operationally, Riot has had a mixed 12 months, with revenues up 63% thanks to soaring cryptocurrency prices. But overall earnings growth has been down, and Riot has a scant 4% profit margin.
Plus, the increasing difficulty of mining bitcoin makes the company’s business model increasingly unattractive.
Action to take: Investors may like shares as a proxy for the crypto market, as the stock should soar if crypto prices rise. However, shares are volatile, so most investors may prefer to invest in bitcoin itself.
For traders, the May $22 calls are priced for an aggressive move higher in Riot. Traders may like the calls, as any pop higher in crypto could mean a massive move higher for Riot that could cause these options to deliver triple-digit returns.
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.