Coinbase Bears Sell Millions of Dollars of Call Options as Stock Jumps

Luzi Ann Santos wrote a column · Sep 28, 2024 01:44

$Coinbase (COIN.US)$ bears are selling millions of dollars in call optionsat a time when the stock is outperforming its peers in the crypto world.

The cryptocurrency exchange saw its shares climb 5.8% to $190.31 as of 1:40 p.m. in New York as $Bitcoin (BTC.CC)$ advanced 1% to the highest since July. That compares with a 0.4% gain for the company's Bloomberg peers, and the S&P 500's 0.01% decline.

While the gain of more than $10 helped push up the value of call options that are now in-the-money, the heaviest volume is in contracts that give the holder the right to buy the stock at $185 by Nov. 15. Bearish positions posted just before noon boosted that volume.

At 11:22:25 a.m. on Friday, a multi-leg transaction was posted that included an active seller getting a $40.13 million premium for writing call options that give the holders the right to buy 1.782 million shares at $185 each by Nov. 15. Those call options accounted for 99.06% of the total volume so far, data tracked by moomoo showed.

Source: moomoo desktop app

(To see unusual activities in the options market in the moomoo app, click here. For Coinbase's options chain, click here.)

At that exact time, another transaction was posted with the active seller getting a $58.8 million premium for selling call options that give the holders the same amount of Nvidia shares at $155 each by Oct. 18. The 17,820 call options, each covering 100 shares, accounted for 99.94% of the total trades for that contract so far. That makes those $155 call options the second most-active Coinbase options.

The bearish trades were posted on a day when nine of the 15 technical indicators tracked by moomoo are flashing early warning signals that the stock could be overbought, and the trend may be reversing. With Friday's gains, the share price has broken above the upper line of the Bollinger Band, a sign to technicians who study charts that the stock could turn bearish.

Source: moomoo desktop app

Equity analysts covering analysts are divided, with about half of them having a buy rating, while 42% have a hold recommendation. While CFRA analyst Alexander Yokum sees Coinbase benefiting from crypto enthusiasm, led by Bitcoin and Ethereum, he said in a note in August that regulatory friction with the Securities and Exchange Commission remains a concern.

Bloomberg Intelligence estimates that Coinbase has more than $1 billion at stake in 2023 SEC enforcement action. While the stock has fallen from this year's intra-day peak of $283.48 since a court allowed most of the regulator's claims to proceed, Elliott Stein, a senior litigation analyst at Bloomberg Intelligence sees a 60% chance that Coinbase could win the case, "if not before this judge, then at the U.S. Supreme Court," according to a note published Friday.

Source: moomoo mobile app

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