It’s not too hard to see why cryptocurrencies were flying higher as Donald Trump prepared to take the helm. To be sure, Trump vocally and emphatically supported decentralized digital assets throughout the campaign trail. However, it’s the policies and overall favorable environment that helped catapult sentiment for the ecosystem.
Let’s be real: cryptos and more specifically the underlying blockchain-mining process consumes an enormous amount of energy resources. In fact, rolling blackouts in Iran’s capital and outlying provinces last year were pinned on crypto mining, at least according to some observers.
The point is, while virtual currencies represent an exciting new frontier, it’s not devoid of sharp criticism, especially given the resource consumption. Subsequently, for the blockchain ecosystem to thrive, proponents require favorable legislation. Otherwise, environmentalists and other advocacy groups could conceivably derail the burgeoning industry.
Of course, Trump 2.0 hasn’t been smooth sailing for the crypto industry. For example, Trump’s embracing of meme coins that bear his name appears to be nothing more than an unseemly cash grab. Sure enough, many investors are savvy enough to recognize when they’re getting played; hence, some of the selloffs witnessed in the space recently.
Still, the environment broadly is supportive of greater crypto integration. With that in mind, blockchain miner MARA Holdings (MARA) on the surface offers a bullish candidate. As more and more people invest in cryptos, MARA’s valuation could rise. If so, it may be better to consider a directionally positive position now.
Nevertheless, the hard data forces a more nuanced discussion.
Heightened Volatility Potential for MARA Stock Incentivizes a Long Iron Condor
At first glance, a decisively bullish position in MARA stock appeared to make sense thanks to the growing excitement for cryptos. To that point, MARA made the list of top bull call spreads for the midweek session based in part on profitability potential. For example, one of the compelling ideas was for the 22/24 debit call spread for the options chain expiring March 21, 2025.
For the above trade to be fully profitable, MARA stock would need to hit (or exceed) the short strike price of $24. On Wednesday, shares closed at $19.69. Thus, for the debit spread to be fully successful, MARA would need to rise about 22% over the next two months. On paper, that seems more than doable.
However, the empirical data imposes some question marks. When MARA stock’s market performance is viewed stochastically — that is, devoid of any other context aside from temporal — the equity carries a neutral to slightly negative bias. Week to week, there’s only a 48.65% chance that a position at the beginning of the period will be positive by the end of it. Over a four-week period, the odds slightly improve to 51.95%.
Now, it must be said that MARA stock encountered an unusual event last week, gaining 17.32% between Monday’s open and Friday’s close. Whenever MARA has printed a one-week return between 10% to 20%, there’s a 56.41% chance that the fourth subsequent week will see a positive return. During these bullish outcomes, the median return stands at 31.86% while during bearish outcomes, the median loss lands at 19.69%.
So, the bottom line is that for MARA stock, strength begets strength. However, the dynamic probabilities of success at 56.41% are only marginally better than the stochastic probabilities of success at just under 52%. Stated differently, there’s a lot of risk baked into a directional wager, considering that the bullish odds are only somewhat better than a coin toss.
On the other hand, since we know there’s a good chance that wherever MARA stock goes, the move will be robust, a long iron condor could be the ticket to success.
Identifying an Ideal Trade Quickly and Efficiently
As one of the more complex multi-leg options strategies, the long iron condor — effectively the combination of a bull call spread and bear put spread (thus establishing upper and lower profitability zones) — can be powerful but simultaneously frustrating. For a popular optionable security, there could be hundreds of iron condors to choose from.
However, from the intelligence gathered above, we know that four weeks out from the anchor event (a weekly return between 10% to 20%), there’s a 56.41% chance that MARA stock will rise. If so, the median return was nearly 32%. However, under the 43.59% of the time when MARA falters, the median loss was almost 20%.
Put it all together and we’re potentially looking at a volatility range between $15.99 at the low end to $26.25 at the high for the options chain expiring Feb. 14. If so, the long iron condor that fits this range is the 16P | 18P || 24C | 26C or the 16/18 bear put spread combined with the 24/26 bull call spread. At time of writing, this transaction risks $95 for the chance to earn $105 or a payout of roughly 111%.
