My 4th Ever Call Synthetic Long Option (Marathon Patent)

Marathon operates as a digital asset technology company that mines cryptocurrencies. It owns cryptocurrency mining machines and a data center to mine digital assets in Quebec, Canada. The company was formerly known as American Strategic Minerals Corporation and changed its name to Marathon Patent Group, Inc. in February 2013.

Marathon estimates that once all 23,560 of its miners are deployed in Q2 2021, producing 15-20 bitcoin/day based on ~$16,000 bitcoin price, the company will generate $8.8M in revenue per month and $6.7M in gross profit per month. Because Marathon has a market cap at just $600 million, I think the stock could go much higher.

Despite the stock appreciating close to 1000% since July, I bought a couple of hundred shares in order to keep my risks small. At the time, price was trading at $9.47. However, last week, I sold my 200 shares.

Fresh highs from bitcoin motivate traders to continue scooping up shares of bitcoin miner stocks like Bit Digital, Riot Blockchain, and Marathon Patent Group. As of noon EST, here's where these stocks were:

Bit Digital was up 23% but had been up 39% earlier in the session.
Riot Blockchain was up 10%, down slightly from up 12% earlier in the day. Marathon was only up 5% but had traded 10% higher shortly after the market opened.

These three stocks aren't just big winners today, they're also among the biggest winners in 2020. Not only is each one at least a 10-bagger and crushing the market, each is also drastically outpacing gains from bitcoin.

These companies mine bitcoin, so as the price of bitcoin rises, so too should their revenue. But to ever hope to justify such a premium valuation, bitcoin would need to become a multi-bagger many times over from here.

So I thought there was no better time to try my first Call Synthetic Long option strategy.

Synthetic stock options are option strategies that mimic the potential of either buying or selling a stock using call and put options. A Synthetic Long Stock involves buying a call option and selling a put option. Because I had success putting on Synthetic Long option strategies this year, I sold my Marathon shares to buy 1 January 2023 call option and to help pay for the trade, I sold 5 January 2023 put options at $2.

I went out that far because the potential returns are going to kill the returns had I just owned the shares. However, if Marathon falls below $2 between now and 2023, I could be forced to buy 1000 shares. But I don't see that happening because this past Monday, Marathon purchased 70,000 Antminer S19 bitcoin miners from Bitmain at a cost of $170 million. Based on Bitcoin hitting a six digit price in the future, something tells me I won't have to worry about buying this company at $2 any time soon.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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