Can’t mine Bitcoin? Buy the shovels.

When I first walked onto a trading floor in 1989 the big thing was airline takeovers.  They were the hot stocks of the day and even DJT got in the action with making a bid for American Airlines.  Since then I have seen biotech, nanotech, tech, internet, 3d, emerging markets, etc, etc…. as the latest hot thing. You know when something is hot when a company goes public on the just the idea that they are going into an industry.  A mini-bubble can happen within a bull market and can come and go with barely a ripple.  Now we have Bitcoin (BTC).

Option Pit had a trader’s summit in Chicago this summer and one of our speakers talked about the crypto currencies and Bitcoin and he was bullish and made a convincing case.  He was wrong about Bitcoin, it went $1000 over his target for NEXT YEAR in 6 months. That is my kind of wrong.  Bitcoin is frothy and about ready to get onto the cover of Time Magazine.  The more interesting picture is that CBOE, CME and SQ are involved in in futures or payments for BTC.  That could be a looming giant pot of fun.  All 3 names are already up on the speculation.  SQ going near parabolic on it in a 3 month span.  So what to do, what to do?

 

LivevolX for Lightspeed

Being an old man, I would look at the old man trade.  Into a frenzy you buy premium and for some reason the IV has barely moved in the CBOE options.  The recent 6% rally pushed the IV down quite a bit.  SQ by contrast has the IV moving up sharply since Mark highlighted it on Friday with SQ moving at a 96% realized vol some days.  I think all the reasons are still valid.  Sometimes you buy the juice or sit on the sidelines. Get the popcorn ready and watch the show.

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The Trade

I like short term long strangle buys in SQ and longer term long strangle buys in CBOE.  Hold on like you are riding a bucking bronco.

Disclosure: Positions in CBOE.

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