Seize MARA Rally Opportunity With An Option Trade!
$Marathon Digital Holdings Inc(MARA)$ has buy new mining sites for $179M as rewards having is nearing. With this new acquisitions, the cost per coin mined will be reduced by around 30% before the reward for securing the blockchain is slashed by 50% next year.
Marathon Digital is in a good position of cash flow to buy these two sites from subsidiaries of lending firm Generate Capital. This acquisition, which will add 390 megawatts of capacity, will be paid in cash.
Bitcoin's (BTC) halving, expected in April 2024, is leading mining companies to reassess their operations to ensure they are prepared for the drop in rewards. One such way is by acquiring smaller firms to bring economies of scale to their activities.
Earlier this month, Marathon said it had more than $800 million of cash and bitcoin to "capitalize on strategic opportunities, including industry consolidation" ahead of the halving.
Marathon Digital (MARA) IV Percentile Rank
MARA implied volatility (IV) is 131.0, which is in the 76% percentile rank. This means that 76% of the time the IV was lower in the last year than the current level. The current IV (131.0) is 23.8% above its 20 day moving average (105.8) indicating implied volatility is trending higher.
Marathon Digital (MARA) IV vs 20-Day HV
The current IV (131.0) in MARA is 14.3% above its 20 day HV (114.5) suggesting that options markets are predicting future volatility to trade above the most recent 20 day realized volatility.
Marathon Digital (MARA) Seasonal Volatility by Day of Year
Historically, implied volatility for MARA tended to rise the most in May with a median IV Of 131.9, while September tended to be when implied volatility declined To its lowest levels With median IV Of 106.6.
Historically, the median IV for the current month of December was 124.1 compared to the current IV of 131.0. The IV level in January following December tended to be lower, with a median IV of 111.1.
Marathon Digital (MARA) Volatility Skew
The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.
The implied volatility for downside puts is decreasing relative to upside calls by quite a significant number, this suggests the market is pricing in more positivity for a bullish upside move.
The Current Skew Indicator is showing a Very Bullish Signal
Marathon Digital (MARA) Debit Call Spread
90-Day Maturity, ATM to +5%
MARA Call Spread Benchmark Index (90-Day Maturity, ATM to +5%) has increased by 0.2% today to 1.8% premium to stock price. This value is above its 52-week average premium of 1.7%.
The MARA Call Spread Benchmark Index is designed to track the theoretical cost of buying an at-the-money call and selling an out-of-the-money call 5% above the spot price for options with 90 days to maturity.
How I Trade Using Debit Call Spread Strategy
I decided to go for Debit Call spread instead to maximize the gain and also to reduce the risks.
Currently, MARA last price is $23.05, I will be using this contract that expiration date is 87 days away on 15 Mar 2024, I will make one leg to buy a call on the $22 strike for $6.20.
I will add another leg - sell a call at $25 strike for $5.30.
The initial cost of the Debit Call strategy would be $0.90 ($6.20-$5.30). In order for me to make a profit from this strategy, the stock price would need to move higher than $22.90 which is calculated from long strike ($22) plus cost of the spread ($0.90).
My maximum gain would be realized if the stock moves above the $25 strike. Hence, my call spread would be worth $3 and my cost was $0.90. This will net me a profit of $2.10.
Summary
Based on the current skew indicator, MARA is showing potential of a very bullish upside, hence, I have decided to go for a debit call option which is around 90 days away.
I believe MARA should be able to trade above $25 once we enter into 2024.
Appreciate if you could share your thoughts in the comment section whether you think MARA will be able to hit $25 and beyond in 2024?
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Great ariticle, would you like to share it?