Coinbase Global (NASDAQ:COIN) shares have seen a remarkable 68% surge since February 23, closely tracking Bitcoin’s 37% ascent. As the halving date for Bitcoin approaches on April 17, COIN stock is poised to continue its upward trajectory alongside Bitcoin. This surge has also inflated COIN’s put option premiums, making them an appealing prospect for short-put strategies.
The impending Bitcoin halving will reduce the number of BTC coins that miners can generate per successful hashing attempt. Scheduled roughly every four years, analysts anticipate the next halving to occur on April 17. With miners needing updated equipment and a diminished supply of Bitcoins, this event is expected to drive Bitcoin prices higher. Consequently, anticipation of this event has driven Bitcoin’s price surge.
Coinbase Global is likely benefitting from heightened cryptocurrency trading activity this quarter, buoyed further by the introduction of ETF funds trading in Bitcoin. So, how high can COIN stock climb?
Analysts suggest Coinbase is poised to generate significant free cash flow, with revenue projections for the year reaching as high as $4.79 billion. Based on estimated operating cash flow margins, this could lead to a considerable rise in cash flow compared to previous estimates.
Using a 1.5% free cash flow yield metric, COIN stock valuation could reach $106.66 billion, implying a price target of at least $403 per share. Consequently, shorting near-term put options with their elevated premiums appears to be a lucrative move.
Shorting put options offers an immediate yield, particularly for out-of-the-money strike prices. For instance, with a strike price 10% out-of-the-money, investors could achieve a 3.25% immediate yield. Similar opportunities exist for nearby expiry periods, such as April 12, presenting substantial potential yields for various strike prices.
However, it’s crucial to acknowledge the risks involved, especially given the potential volatility in the stock. While this strategy can yield significant gains for COIN stockholders, a reversal in stock performance could lead to unrealized losses.
In summary, shorting put options on COIN stock presents an attractive opportunity for investors confident in the stock’s continued ascent. Nevertheless, prudent risk management is essential to navigate potential market fluctuations.
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