This Strategy Pays You 12% While Lining Up COIN at Bargain Prices
At about $196.52 a share, Coinbase Global (COIN) is trading about 53% below its 52W high.
Do you think COIN stock is a good long-term bet at current levels? What about at a 60% discount at about $80 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
12% annualized yield at 60% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 3/19/2027, with a strike price of $80
- Collect roughly $634 in premium per contract (each contract represents 100 shares)
- That’s about 7.7% annualized yield on the $8,000 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 11.7%
- And you give yourself a chance to buy COIN stock at deep discounted price of $80
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
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Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| COIN stays above $80 | You keep the full $634 premium – 7.9% extra income over the next 374 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| COIN closes below $80 | You’ll be obligated to buy 100 shares at $80. But thanks to $634 premium, your effective cost basis is just $73.66 per share – a roughly 63% discount from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell COIN Stock or check Coinbase Global Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds.
Why Hold COIN Stock Long-Term
Coinbase is a leading brand and key enabler in the secular growth industry of digital assets, making it an attractive long-term asset to own at a reduced cost basis.
Competitive Advantage
We classify COIN’s economic moat as NARROW, with the primary source being Brand
- Established and recognized brand name in the U.S. with significant market share.
- Maintains a multi-tiered fee structure, charging higher fees on its retail platform due to brand trust and user-friendliness.
See Coinbase Global Full Analysis.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 13.1% (Grand View Research)
Secular Trend: Digitalization of Assets
Key Risks: Regulatory uncertainty and cybersecurity threats.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: Maintains a strong balance sheet with a net cash position, indicating low bankruptcy risk.
If you are not comfortable with options or stock-specific trades, Portfolios are the way to go as they can protect and grow wealth even better.
Smart Investing Begins With Portfolios
Single stocks swing wildly but staying invested matters. A well built portfolio helps you stay invested, captures upside and softens the blows from individual stocks.
Why settle for average market returns? The Trefis High Quality (HQ) Portfolio invests in a diverse group of 30 stocks that have collectively delivered stronger upside with reduced volatility compared to the broader indices. Discover the methodology behind these smoother, higher returns by checking the HQ Portfolio performance data.