Option Traders Score 485% Return on Crypto Debit Spread

Vertical debit spreads allow options traders to capitalize on strong directional moves

Managing Editor
Feb 14, 2024 at 1:15 PM
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Earlier this week, subscribers to Schaeffer's Vertical Options Trader scored a whopping 485% return with the Marathon Digital Holdings Inc (NASDAQ:MARA) front-month, out-of-the-money vertical debit spread. We're going to take a look back to see why we were initially bullish on the cryptocurrency stock, and how the options trade unfolded.

At the time of our entered recommendation on Jan. 19, founder and CEO Bernie Schaeffer laid out the MARA call debit spread: buying the February 20 call and simultaneously selling the February 25 call. The shares had just pulled back by 50% from its Dec. 27 peak to support around $16-$17, and looked to be at an intriguing entry point.

Bitcoin (BTC), which is tied to most crypto-adjacent stocks, had declined from an early-January peak and settled into support at the rising 80-day moving average, per the chart below. This area also coincided with the psychologically-significant $40,000 round-number. 


MARA's average true-range volatility was more than double its implied volatility (IV) of 123%, indicating the leverage from the call spread was very appealing.  

BTC briefly tested and breached $40,000 and the 80-day trendline, but rallied to climb past $42,000 by Jan. 26, with MARA along for the ride. From there, it was off to the races, with the enigmatic cryptocurrency vaulting past $50,000 by Feb. 12, and Marathon Digital stock adding 62% in February alone. We closed half of our position on Friday, Feb. 9, and closed the other half on Tuesday, Feb. 13, allowing traders to lock in a net profit of 485%.



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