While the election of Donald J. Trump has elicited a range of opinions, there’s no denying his victory’s impact on the cryptocurrency market. At the moment, the total market value of all digital assets exceeds the $3 trillion mark. That’s above the GDP of Italy and the blockchain has its sights fixed on France next.
With this explosive rally, it’s natural for investors to consider relevant enterprises like Coinbase (COIN). Prior to the election, the options market was signaling for a significant spike. However, the analytics at the time grossly underestimated the explosiveness of the surge. Just in the trailing month, COIN stock gained more than 45%. Seemingly, with nothing to stop this ascent, the crypto wallet and exchange may have blue skies ahead.
Of course, there’s always the possibility of an unsustainable bubble brewing. And when that happens, the resultant popping can be utterly catastrophic. Therefore, value-oriented investors may want to seek a different avenue. In that spirit, they could find opportunity in uranium specialist Cameco (CCJ).
Fundamentally, Trump views cryptos as a powerful economic (and therefore political) tool. As Barchart content partner The Motley Fool argues, the crypto complex “creates jobs, it stimulates economic growth, and it can be an economic lifesaver for rural communities located near cheap energy sources.”
But the blockchain can’t survive without the mining networks that essentially provide its fuel. That’s where Cameco comes into play. The amount of energy required for crypto mining initiatives is simply astonishing. Therefore, a decentralized economy probably can’t exist without mentioning nuclear energy, spelling potential upside for CCJ stock.
Unusual Options Activity Offers an Intuitive Read into CCJ Stock
One of the complicated matters about options is their two-sided nature: whenever an option is bought, someone else is also selling it. Put another way, a transacted option means that there’s always someone else taking the other side of the bet. Therefore, reading options sentiment can be a very difficult exercise.
Arguably, though, when it comes to CCJ stock, you can just read the screener intuitively. For example, on Friday, the most unusual activity for CCJ derivatives concentrated on call options. Several calls with varying strike prices saw volume reach into four digits, well above their open interest counterpoints.
Of course, that also means that there were plenty of sold calls but here’s the thing: Barchart’s options flow screener — which filters exclusively for big block transactions likely placed by institutional investors — showed net trade sentiment clock in at just over $1 million, favoring the bulls.
What’s more, total dollar volume for bearish trades reached only $-304,700, whereas bullish trades hit a total of $1.31 million. It wasn’t even close on Friday — the alpha dogs wanted to buy CCJ stock. Still, there is one wrinkle to consider.
On the final day of last week, the most unusual option based on the volume-to-open-interest ratio was the $60 call expiring Nov. 22. However, options flow data reveals that the institutional players were selling this call. Additionally, the top players were also selling other calls for this expiration date, including the $54, 56 and $57 strikes.
Essentially, astute traders can leverage the heightened demand for these strikes as part of their bull call spread strategy. By selling one of these strikes, a trader can capture higher-than-normal premiums and use that to defray the debit paid of a more realistic strike.
Selecting a Potentially Lucrative Spread
With the information above, speculators may consider bull call spreads for the options chain expiring Nov. 22. But then, which strike price should represent the short leg of the spread: $54, $56, $57 or $60? To better answer this question, investors should turn to Barchart’s Expected Move screener.
Thanks to its proprietary algorithm, Barchart is able to calculate the expected high-low range of an optionable security for given expiration date intervals. For CCJ stock on Nov. 22, shares could either fall to $51.13 or rise to $56.05. If we’re bullish, $56.05 may be the best we can hope for. Therefore, choosing the closest strike price for the short leg may be a smart choice.
With that in mind, the long leg strike could be $52. This would place the breakeven price at $53.90, only about 0.6% above Friday’s close. For this trade to be fully profitable, CCJ must move up 4.5% in less than one week. It’s a tall order but the Expected Move algorithm suggests it’s possible.
Plus, anything above the breakeven price (not including administrative costs) and below the short strike represents a partial profit. For those seeking an extra kick to their speculation, this call spread could be quite enticing, particularly because of the possible 110.53% payout.
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