To The Moon

Overview

On July 5, 2024, I opened five contracts of MARA vertical put options with a maturity date of August 16, 2024. This involved selling puts at a strike price of $16 and buying puts at a strike price of $15, collecting an option premium of $25 per contract. This strategy was underpinned by positive indicators in Marathon's mining efficiency, potential revenue boosts from decreased mining difficulty, a lucrative new venture in mining Kaspa, and promising price movements of both Marathon and Bitcoin.

Rationale Behind the Strategy

Superior Mining Efficiency: Marathon exhibited better mining efficiency in terms of revenues per exahash compared to its main competitors, Riot and CleanSpark. This efficiency positioned Marathon favorably within the mining industry.

Decreased Mining Difficulty: The forecasted 5% decrease in mining difficulty, due to record low hashprices, suggested a potential increase in Bitcoin production for Marathon. This was expected to positively influence Marathon's profitability and stock price.

Kaspa Mining Venture: Marathon’s venture into mining Kaspa, with projected revenues exceeding $87 million and high margins up to 95%, indicated a strong potential for substantial financial gains.

Market Sentiment and Price Movement: The bullish sentiment around Marathon and Bitcoin's price movements suggested a strong rally in the near term, further supporting the likelihood of an increase in Marathon's stock price.

Outcome and Analysis

On July 15, 2024, I decided to close the position by paying an option premium of $11 per contract when MARA stock surged to $22. This price surge was triggered by Bitcoin soaring above $63,000 due to the unexpected event of Trump's assassination.

Profit Realization: By closing the position early, I realized a profit. The initial premium collected was $25 per contract, totaling $125 for five contracts. Closing the position cost $11 per contract, amounting to $55 for five contracts. The net profit from this strategy was $70 ($125 - $55).

Impact of External Events: The dramatic increase in Bitcoin’s price following Trump’s assassination was an unforeseen event that significantly influenced MARA’s stock price. This highlights the impact of external and unpredictable events on investment outcomes.

Strategic Adjustment: The decision to close the position early was driven by the substantial increase in MARA’s stock price, which minimized potential losses from holding the position until maturity. This strategic adjustment was crucial in maximizing the gains from the investment.

Conclusion

The MARA vertical put option strategy proved to be profitable, largely due to favorable market conditions and an unforeseen external event that boosted Bitcoin’s price. This experience underscores the importance of monitoring market conditions and being adaptable to unexpected events. The initial rationale for the strategy was sound, based on Marathon's strong mining efficiency, potential revenue increases, and positive market sentiment.