Last year’s crypto-market meltdown triggered a series of bankruptcies that almost completely reshaped the digital-asset industry. This year, government watchdogs appear to be poised to try and finish the job.
The past week saw the industry hit with another deluge of enforcement news, from the SEC’s threat to take legal action against Coinbase Inc. and its suit against the Tron blockchain network to the apprehension of crypto fugitive Do Kwon. Even celebrity crypto promoters like actress Lindsay Lohan, Youtuber Jake Paul and rapper Soulja Boy got caught up in the crackdown.
In this post we discuss:
- What Just Happened in Crypto Last Week?
- Why is the SEC Going After Coinbase?
- What Will Move Coinbase’s Stock Price?
- How do we Place an Option Trade in Coinbase Now?
And we show you a real example on the option trading platform
Hey guys, Darren here. Thanks for reading.
We talk about action steps you can take today to increase profits and reduce risks in your portfolios by trading options.
Real quick: Please check out and download the FREE options Workshop in the link. It talks about the two main reasons why options can be less risky and more profitable than just buying stocks alone. It also details how to profit in both directions and pick your win percentage which you can’t do just buying stocks alone.
DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.
What Just Happened in Crypto?
The collision course between the US government and crypto true believers’ vision of a system where money can be freely exchanged around the world without “censorship” by authorities was accelerated by the failure of the Terra blockchain’s stablecoin to maintain its $1 peg and the bankruptcy of FTX last year, which combined to eliminate almost $2 trillion of digital wealth.
Do Kwon’s indictment in the US, which came shortly after his arrest Thursday in Montenegro, also revealed that the government believes the collapse of his Terra blockchain project was more than just a $60 billion accident. According to prosecutors, Kwon also allegedly engaged in market manipulation and deceived investors.
As mentioned, Lindsay Lohan, Rapper Soulja Boy and Jake Paul were promoting coins traded on the Tron blockchain. The SEC came after them for not disclosing that they were being paid to promote. Kind of silly if you ask me as I’m sure most people assume that. Anyway, Lohan and Paul cut a check and settled. Rapper Soulja Boy hasn’t settled.
Why is the SEC Going After Coinbase?
At the center of much of the recent actions is the SEC’s decision to treat cryptoassets as securities. This would indicate that they must be registered with the agency and subject to all the regulations that go along with it. Most importantly taxes.
Needless to say, digital-asset aficionados were livid with this news, especially when it comes to publicly listed Coinbase, which says it has repeatedly tried to engage with the regulator to no avail.
The SEC is testing its authority, leaving those caught up in its sights an option: pay a settlement, or fight it in court.
Coinbase CEO Brian Armstrong has made it clear that the company will fight the complaint, tweeting that the process will prove “that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.”
It sounds like Coinbase is working to try and help to create more regulation. I haven’t heard anything about fraud or deceiving investors with Coinbase.
Overall, I expect we will see more enforcement news like this in the future given we are operating in an environment with little or no regulatory guidance,”
Coinbase Wells Notice
Meanwhile, cryptocurrency platform Coinbase revealed it had received what’s called a Wells notice, which is a warning that the SEC has identified potential securities violations that could lead to a lawsuit. This continues a multiyear battle with the SEC that has left Coinbase’s questions about what is and isn’t a security unanswered. The company said it is happy to fight the SEC in court.
Ironically, the SEC’s actions may lead to more clarity for those involved with building innovative products using the blockchain and cryptocurrencies. If the SEC loses its case with Coinbase, clearer rules may need to be made by regulators and lawmakers.
Coinbase Global (COIN) also holds a significant amount of Bitcoin. According to CoinGecko, Coinbase holds 9,000 Bitcoins worth $248 million at today’s price.
That’s because Coinbase, as the world’s second-largest cryptocurrency exchange and has a core business activity that is highly leveraged to the price of Bitcoin.
What Will Move Coinbase’s Stock Price?
What could propel Coinbase up?
Coinbase could move up significantly if a couple of things happen. First if the price of Bitcoin was to move up significantly. The other reason would be if there was more regulation and clarification surrounding the treatment of digital assets.
I think that these two factors are somewhat tied together. I also don’t think the SEC is in a big rush to clarify the regulation.
What would be the reason for a move down in Coinbase?
The risk to the downside in Coinbase is if the price of Bitcoin drops significantly. This would affect Coinbase’s stock price.
Also, if there is a legal battle and Coinbase is found to have violations. I really hope this is not going to be the case since it appears that Coinbase has been trying to help to gain regulatory clarification.
How do we Profit and What is the Best Way to Trade Coinbase Now?
Alright guys, what is the best way to make money trading options? Sell premium in high volatility!
It’s a no brainer. If you don’t know that, download the Free Options Workshop in the link below.
If we don’t have a bias up or down in Coinbase then we should look to trade an Iron Condor. We then hope the stock price continues to stay in the range it has been trading in for the last 10 months.
Coinbase Iron Condor Option Trade
So let’s go the Tastytrade platform. It’s the best option trading platform. I’ll put a link down below.
Punch in COIN in the upper left while on the trade tab.
We see that the IVR is 48 which is great since we collect more premium in high IVR. Click on the May 2023 option chain since it is closest to 45 DTE which is the sweet spot for getting the most turns, most premium and least risk.
When we will go to the 20 delta put and click on the bid to sell the 50 put and the ask to buy the 40 put. Then we go to the 33 delta call and click on the 90 bid and 100 ask to sell the call vertical.
We collect $405 for doing this which is a huge amount of premium. We collect this much since the market thinks there is a pretty good chance that those short strikes will be breached in the next 55 days.
Coinbase Chart
However, in looking at the chart for Coinbase we see that it has for the most part stayed in between those short strikes for most of the last 10 months.
We switch to the curve mode by clicking curve.
We can visually see the huge profit range in green. What I like about this trade is the following.
We have 67% chance of making 50% profit in other words $202. This is really my goal. Once I hit that I will likely close the trade for a winner. I rarely hold to expiration.
If the stock price does approach one of the short strike we can roll the other vertical closer to the price and collect additional premium.
At 15-21 DTE I will look to close or roll the trade either way.
I don’t think crypto, Bitcoin and digital assets are going away anytime soon. They are the future and are here to stay.
For that reason I think Coinbase will be around for a while. The company will actually help to create more clarity and regulation.
An Iron Condor is a great way to trade Coinbase. You collect larger premiums as long as it stays within a trading range.
Alright guys, I’ve put a link down below for the FREE Options Workshop. Be sure to grab that.
Remember to please let me know your thoughts on the video in the comments.