Coinbase spent the last month hurdling key resistance levels
Subscribers to Schaeffer's Weekly Options Trader service recently scored a net profit of 267% with Coinbase Global Inc (NASDAQ:COIN) weekly 11/24 83-strike calls. We're going to take a look back to see why we were initially bullish on the Bitcoin (BTC) adjacent stock when we recommended the call, and how the options trade unfolded.
When we entered our bullish COIN position on Nov. 7, the company was fresh off an upbeat Nov. 3 post-earnings reaction of 1.4%. On the charts, the shares had put $77 firmly in the rear-view mirror after a volatile sideways pattern in September and October. This level was cleared back in March, but then Securities and Exchanges Commission (SEC) lawsuit threats foiled any additional breakout.
The stock had also cleared $85 and its 80-day moving average, both of which had been resistance several times already in 2023. Short sellers were in covering mode, yet with a healthy 12% of COIN's total available float sold short, there was still ample room for an unwinding of bearish bets.
Options were affordably priced amid a post-earnings volatility crush. The stock's Schaeffer's Volatility Index (SVI) stood higher than just 9% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.
After a 5.1% bull gap on Nov. 9, we closed half of the Coinbase call position just a few days after entry to lock in a rapid-fire 100% profit. As BTC continued its rapid ascent, we subsequently closed the final half on Nov. 22 for a bottom-line profit of 267%, allowing options traders to more than triple their money.
