One of the difficulties in deciphering the rumblings in Barchart’s screener for unusual stock options volume is of course the interpretative component. Especially when it comes to popular entities like blockchain mining specialist Cipher Mining (CIFR), just knowing the core stats of put and call volume and open interest may not be enough.
Just like theologians dedicate years of their lives to understanding the true meaning of a religious text, traders for certain securities just can’t take options information at face value. For example, high volume for call options generally signifies bullish intent. However, traders can also sell calls, which have bearish implications. Plus, the acquisition of calls and puts can be used to hedge against positions.
Therefore, it’s important to recognize the broader context of your target investment or trade before plunking money into it. Fortunately (for lack of a better word), with CIFR stock, you arguably don’t have to deal with reading between the lines. Instead, you can interpret the unusual activity in the derivatives market at face value.
And if you need help, the fundamentals directly align with options activity for CIFR stock. With the Federal Reserve revealing that it regards high inflation as an ongoing threat that may require hawkish intervention, the circumstances are becoming more bearish for CIFR stock and the recently troubled cryptocurrency sphere.
I’m not telling you to trim your Cipher Mining exposure. But it’s something that you’re really going to have to think about carefully.
CIFR Stock Prints Straight Talk in the Options Market
Following the close of the Aug. 18 session, CIFR stock ranked among the top highlights for unusual options volume. Specifically, total volume reached 11,124 contracts against an open interest reading of 45,027. Further, the delta between the Friday session volume and the trailing one-month average metric came out to 344.25%.
Transactionally, call volume came out to 1,903 contracts while put volume dominated the day at 9,221 contracts. This pairing yielded a put/call volume ratio of 4.85, which at face value implies bearish sentiment. As well, the put/call open interest ratio stands at 1.61X, again carrying pessimistic implications.
Notably, implied volatility (IV) came out to 131.91%, representing an increase of 11.63%. Essentially, this dynamic indicates that the underlying options for CIFR stock are becoming more expensive, suggesting that traders expect a significant price move. However, IV alone does not necessarily point to a specific direction.
To better understand the context of the latest trades, we should consider the flow of institutional money. Data from Fintel indicates that from Aug. 17 through the close of Aug. 18, transactions with bullish intent reached a total volume of 21,273 contracts while transactions with bearish intent printed volume of only 5,421.
Significantly, while the bullish transactions involved a mix of bought calls and sold puts, the bearish transactions were “straight” – exclusively bought puts. And that’s what I meant by taking CIFR stock options at face value. During last week’s Thursday and Friday sessions, the volume that you see for puts (at least on the institutional side) mostly consists of acquired puts, which natively have pessimistic implications.
At the moment, though, Wall Street analysts peg CIFR stock as a consensus strong buy, clouding the overall narrative. Further, the optimism is unanimous: four strong buys, one moderate buy and no holds nor sell ratings. Further, the mean price target stands at $5.10, implying over 62% upside potential.
Still, with the smart money apparently looking to profit on the downside, holding the bag on CIFR stock becomes a legitimate risk.
Cipher Mining is Vulnerable to Crypto Fluctuations
While blockchain mining companies offer an alternative exposure to the cryptocurrency market, they present two considerations that may become vulnerabilities. First, the revenue of blockchain or crypto-related enterprises tend to correlate strongly with the ebb and flow of crypto pricing, which is volatile and unpredictable.
Second, blockchain businesses are exactly that, businesses. To survive, many enterprises – especially the miners – may have to implement actions that run contrary to the ethos of hardcore crypto proponents; essentially HODL-ing or holding on for dear life. As we’ve already seen, negative sentiment and protracted losses have forced some miners to sell their crypto holdings, leading to even more downward pressure.
Now with the Fed likely signaling more rate hikes in the future, you don’t have to read anything between the lines. The framework is as follows:
- Crypto prices are falling, leading to concerns about blockchain miners.
- Institutional flow indicates that the smart money is buying put options on CIFR stock.
- Monetary policy may get even more hawkish than it already is.
Again, I’m not here to tell you what to do with your money. However, I will strongly urge investors to put two and two together.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
