Last night on CNBC’s Fast Money we discussed stocks that have been associated, and benefited from the rise of late in Bitcoin, click below:
My take is simple, there are NO pure plays in the stock market on cryptocurrencies if you want pure exposure, then you need to buy into some crytpo-assets, which at this stage of the game might be hard to stomach. Shares of Square (SQ) were already up massively on the year when back in mid-November the company announced an experiment with letting Square Cash App users buy and sell Bitcoin. SQ’s stock essentially went from $40 to $50 following the news (we offered a way to play for such a move at the time here), but has since retreated to those mid-Nov levels:
A few weeks back I throughout a $50 year end target because it was a nice round number, now with the stock having gone straight to $50 and round-tripped the move, it might make sense for bulls to re-target that level between now and year-end. I am not sure this is a stock I want to be long into the new year given its massive ytd outperformance, but it might have one more run to the prior highs.
If I were inclined to play for a re-test of the prior highs by New Years, purely as a momentum play, and one that makes sense to do with defined risk given the stock’s 190% ytd gains.
Bullish Trade Idea:
SQ ($39.25) Buy Dec 29th 40 / 45 call spread for 1.25
-Buy to open 1 Dec 29th 40 call for 1.60
-Sell to open 1 Dec29th 45 call at 35 cents
Break-Even on Dec29th expiration:
Profits of up to 3.75 between 41.25 and 45 with max gain above 3.75
Losses of up to 1.25 between 40 and 41.25 with max loss of 1.25 below 40
Rationale: this trade offers very near the money participation while also offering an attractive risk-reward, risking 3% to possibly make up to 9%.