Options Corner: How A Simple Adjustment Turns HUT Stock’s Chaos Into Opportunity
While the cryptocurrency market has been struggling since early October, as history demonstrates, it’s usually not a good idea to stay indefinitely pessimistic on the sector’s prospects. Crypto miner and energy infrastructure specialist Hut 8 Corp (NASDAQ:HUT) appears to be articulating this viewpoint, with shares climbing over 5% on Tuesday. Still, even with the big bump, there could be additional gains to be extracted from HUT stock.
Fundamentally, bullish investors can take heart with a potential rebound brewing in the digital asset market. Though we’re not seeing the remarkable ascendancy that usually characterizes crypto rallies, technical analysts would argue that multiple benchmark assets have found a floor. Given the severe drop in value in recent months, even stabilization is a piece of good news that blockchain adherents will gladly take.
On the options order flow front, traders are expecting a massive move over the next several weeks for HUT stock. How do we know this? Multiple resources report that the “expected move” for the January 16 monthly options chain is about 18.8% in either direction. Based on the current market price, that would imply a dispersion between $43.04 and $62.96.
As you might imagine, the February-month expiration date is even worse, with an expected move exceeding 20%. Depending on how each individual source calculates their projections, the range could be around $35 to $65 or wider.
These numbers aren’t voodoo as they’re built from implied volatility (IV) using the Black-Scholes model. Without getting into too many mathematical complexities, IV is very much like the “whoosh” of a passing car relative to where you’re standing.
Based on the crack of the wind and the length of the aural resonance, you can infer the velocity of the vehicle. But without additional context, you can’t tell where exactly the driver is headed — especially in a major metropolitan area.
Still, with a little detective work, we’re going to narrow down this wide-as-heck dispersion to help even the odds.
Focusing On The Likely Range Of Outcomes For HUT Stock
When talking about IV and …
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