Market Overview

Betting On Bitcoin? A Look At Some Large Overstock Option Trades

Betting On Bitcoin? A Look At Some Large Overstock Option Trades

Bitcoin prices have been on fire in recent weeks, and Inc (NASDAQ: OSTK) has been along for the ride. Overstock shares are up more than 44% in the past week, and at least one large option trader believes the Overstock rally has legs.

The Trades

On Thursday morning, Benzinga Pro subscribers received a series of options alerts related to Overstock.

At 9:01 a.m., a trader bought 1,000 call options with a $12.50 strike price expiring on Sept. 20 at the ask price of $2.312. The trade represented an $231,200 bullish bet at a break-even price of below $14.81.

At 9:24 a.m., there was another buy of Overstock call options with a $13 strike price expiring on July 19 at the ask price of $1.849. The seller added 1,001 call options, a bullish bet worth $185,084.

A final trade went through a little over hour later when a trader purchased an additional 1,500 Overstock call options at a $13 strike price that expire on July 19. The calls were purchased at the ask price of $1.851 and represent a roughly $277,650 bullish bet with a break-even price of $14.85.

After all was said and done, the trading action represented an aggregate bullish bet of roughly $693,934 on Overstock.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given none of the Overstock trades exceeded $277,000 in size, it’s unlikely they were institutional hedges.

Betting On Bitcoin

Assuming Tuesday’s trading action did not represent hedging, options traders seemed decidedly bullish about Overstock and/or bitcoin.

Overstock began keeping 50% of the bitcoin it received in payments as an investment back in 2017. The company announced last November it would sell its retail business and pivot exclusively to blockchain technology in 2019. Earlier this week, Overstock CEO Patrick Byrne said the company has at least two “attractive buyers” interested in acquiring its e-commerce platform.

In addition, Overstock subsidiary tZERO announced on Thursday it's launching the tZERO Crypto App, which will serve as both a digital wallet and exchange service provider. The initial app will support both bitcoin and Ethereum upon launch.

After a horrendous year in 2018, bitcoin prices have rallied 203% in 2019 to above $11,000 for the first time since February 2018. The bullish option traders on Thursday may be making a bet that the bitcoin rally continues in the near future, driving upside for Overstock shares. They could also potentially be placing a bet on a bidding war for Overstock’s retail business given the CEO’s recent comments.

Overstock traded around $13.19 per share at time of publication.

Related Links:

Options Trader Makes Aggressive Bullish Play On Stars Group Rebound

How To Read And Trade An Options Alert

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