Riot Blockchain CEO Sells Shares as Monster 2017 Comes to a Close

Options traders have blasted RIOT stock

Jan 2, 2018 at 10:16 AM
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Riot Blockchain Inc (NASDAQ:RIOT) is down 3.9% at $27.28, even as bitcoin trades higher. Today's downside comes after CEO John O'Rourke revealed in an SEC filing that he sold 19,583 RIOT shares for $28.45 apiece, and 10,800 shares for $28.90 each. The transaction occurred last Friday, Dec. 29, when RIOT stock closed at $28.40.

In the last three months, the shares have nearly quadrupled in value -- due in large part to the former biotech shifting its business strategy to bitcoin mining machines. And though Riot Blockchain stock is trading well below its Dec. 19 five-year high of $46.20, this pullback was quickly contained by the equity's 20-day moving average

Options traders have been quick to to chime in on the volatile stock, too. Currently, 70,237 calls and 48,948 puts are open on RIOT -- in the 77th annual percentile. The January 2018 35 and 40 strikes are home to peak call open interest of more than 4,000 contracts apiece, while the January 2018 10 and 20 strikes make up peak put open interest of 5,931 and 3,303 contracts, respectively.

Data from the major options exchanges confirms mostly buy-to-open activity at each strike, meaning those initiating long calls expect RIOT stock to continue to rally over the next several weeks. Those purchasing the puts, meanwhile, are betting on the security sinking below the strikes by front-month options expiration at the close on Friday, Jan. 19. Given the deep out-of-the-money status of the puts, however, this could be at the hands of shareholders initiating options hedges.

Regardless, it's an attractive time to buy premium on short-term RIOT options, based on the stock's 30-day at-the-money implied volatility of 147.3% -- in the 20th annual percentile. In other words, low volatility expectations are being priced into near-term contracts, which could increase the benefits of leverage for premium buyers.


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