Bitcoin! Dogecoin! NFTs!
If your trading feed isn’t cluttered with cryptocurrency buzzwords, I’ll assume you’ve gone off the grid and/or made enough money in the markets to travel the Galapagos (congrats!).
Even traders who aren’t obsessed with crypto can’t seem to get away from the hype — it’s everywhere.
Heck, even Fed Chair Jerome Powell is entertaining the idea of a “digital dollar.”
After all, just look at how many cryptocurrencies are out there these days …
Over 4,000 in early 2021, compared to fewer than 1,000 in 2016, and just 66 eight years ago!
Data courtesy of Investing.com
So when Coinbase Global (Ticker: COIN) — a cryptocurrency exchange — shares debuted earlier this month, direct-listing on April 14, it seemed to be all anyone was talking about.
And today, I want to talk about where new COIN option traders are placing their bets — and where the shares need to trade to get me interested.
The New COIN on the Block(chain)
When I saw how much attention was surrounding the COIN debut on April 14, I made a bold prediction: That the stock would have options listed within a week.
Turns out, I was right! (First time for everything, my wife would say.)
COIN opened for trading at $381, which was 52% higher than Nasdaq’s direct-listing reference price of $250.
The stock peaked just under $430 on Day 1, but quickly lost steam after that, ultimately sliding south of $300 last week to close around $292.
Daily chart of COIN – courtesy of StockCharts
Meanwhile, many initiating analysts have been rather generous with COIN, with Rosenblatt, Loop Capital, and BTIG among the brokerage firms doling out “buy” ratings.
In addition, DA Davidson set a hefty price target of $650 — more than double COIN’s current price.
However, as many of you know, I don’t put much stock into the talking heads of Wall Street …
I prefer to watch The Gameshow Network and look at the cold, hard data to tell me where the money is flowing …
And it looks like many of the early COIN option traders are hoping for a big bounce, while longer-term traders expect the bleeding on the charts to stop … eventually.
COIN Options Check-In … And Where I’m Looking for Entry
Coinbase options began trading last Tuesday, April 20, to much fanfare.
It appears initial strikes ranged from as low as $165 to as high as $510, encompassing the stock’s range on the charts thus far.
According to data from Trade-Alert, out-of-the-money (OTM) calls have easily been the most popular COIN options, with open interest of roughly 26,000 contracts, as of this writing.
For comparison, about 19,000 OTM puts have been opened thus far, pointing to a bullish skew in the option pit.
COIN open interest at the close on 4/23 – courtesy of Trade-Alert
The most popular COIN call so far has been the 400-strike option expiring May 21.
Buyers of this call expect the crypto stock to climb back atop the round-number $400 level within the next month or so.
The closer-to-the-money 305-strike call — also expiring May 21 — is runner-up as far as early call open interest, with buyers hoping for a more modest rebound above $305 in the short term.
Digging deeper, it looks like even many of the COIN put options opened were attributable to neutral-to-bullish traders — or, at least, to traders expecting a long-term floor for the shares.
The most heavily populated strike across the board is the deep OTM 165-strike put expiring in January 2022.
COIN open interest at the close on 4/22 – courtesy of Trade-Alert
The bulk of these LEAPS — Long-Term Equity AnticiPation Securities — look like they were sold to open.
Unlike put BUYERS, who usually want the underlying stock to fall beneath the strike price, put SELLERS hope the shares stay above the strike price during the options’ lifetime.
So, it’s fairly safe to assume those COIN put sellers don’t think the shares will drop below $165 before January 2022.
As for me, I’m watching the $250 level for COIN …
That was the big, buzzy number before COIN stock debuted last week, and it’s likely where other buyers may be looking to step in.
If the shares continue their recent downward trajectory, it shouldn’t take too long to get there.
If and when it does, consider me interested.
Until then, I’ll likely continue keeping close tabs on the crypto stock from the sidelines.
Enjoy the rest of your weekend!
Your Only Option,