Digital assets have been one of the stories of 2021 but have been largely untradeable outside of spot trading due to size and lack of options availability. /BTC the bitcoin futures trade at a 5 Bitcoin notional value, while /MBT the micro contract at 1/10th the size might be a bit too small, and neither have a liquid options market.
MARA is a digital asset mining company with a rolling correlation to /BTC above 0.50 and as high of 0.80. For context, this is roughly the range of correlation between AAPL, the largest component weighting of the SP500, and SPY the SP500 ETF.
With considerable call side skew in the options pricing and volatility heavily skewed in the short durations, MARA sets up as an interesting long diagonal play to the upside. If this continues into 2022, buying the 40 delta call option in the 40-70 day range and selling the 20 delta shorter duration call (15-30 DTE) should set up as a cheap long delta play with high positive gamma exposure and just enough theta to offset short term moves to the downside.
MARA:/BTC Rolling Correlation
Source: tastytrade
— Written by Nick Battista, Host of Options Trading Concepts LIVE
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