Earn Cash Off Of Coinbase Volatility

24 ส.ค. 2023

Hey guys! Today, we're looking at a Trade Idea in Coinbase, the infamous public American crypto exchange.

Like most of our trade ideas, this post focuses on selling put options - this time, on COIN shares.

In case you're unfamiliar with options -> when you sell a put option, one of two things happens.

Either;

A.) The stock price finishes above the strike price of the put when the put expires, in which case you make money.

B.) The stock price finishes below the strike price of the put when the put expires, in which case you’re forced to buy the stock at the strike price.

With the trades we publish, if the stock goes up, sideways, or down a bit, you'll make money. If the stock goes down a lot, then you'll be forced to buy shares.

In other words - either make money, or buy the dip!

The trick is finding the right stock at the right time.

Right now, COIN seems like a great candidate for this strategy.

Selling the 11/17/2023 $50 strike put options yields more than 19% on an annualized basis, and the option has an 88% chance of expiring worthless (max profit!)

While the stock has been pummeled since IPO in early 2021, on the weekly chart it seems as though the company has found somewhat of a bottom:



Additionally, while the company has struggled with earnings in the past, the company still remains cash flow positive, and trades at an attractive 5x free cash flow:



Finally, $50 has been a great support level in the stock over time, so picking up shares at this demand zone should have added probability.

What do you think of this trade? Let us know!

Cheers!


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