The SEC crackdown on the crypto industry this week has seen Coinbase stock plummet.
Just 24 minutes before the SEC announced its lawsuit against Binance, a trader closed a large options trade, betting on a stock going down, how Bloomberg discovered.
Depending on if and when the trader closed his position, the bet could have yielded a profit of up to $2.6 million.
The size crypto billingwhich the US Securities and Exchange Commission cited this week, has caused a lot of collateral damage.
As the regulator announced lawsuit after lawsuit, first against Binance and then against Coinbase, prices of assets linked to the industry plummeted. Few felt the crackdown as badly as they did Coinbase stock itself.
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after the Coinbase Stock After closing down 9 percent on Monday following the Binance report, it slipped another 21 percent to an intraday low on Tuesday when the lawsuit was announced. Overall, the stock fell 28 percent on Tuesday compared to the previous week’s closing price. But a new report by Matt Turner and David Marino at Bloomberg According to this, it played into the hands of an investor who made an extremely profitable trade just minutes before the SEC announced the original Binance lawsuit.
This is how a dealer could have made millions
After the data compiled by Bloomberg the trade went like this:
- At 10:36 a.m. Monday, someone bought a block of 4,806 put contracts with a strike price of $50 when the stock was trading at $61.77
- Buying put contracts is essentially a bet that the stock price will fall below the strike price
- The options, which were bought at 18 cents a piece, rose to nearly a dollar. Had the investor closed their position at the high, they would have returned 460 percent, according to Bloomberg
- The price of the options rose to $5.65 apiece on Tuesday when Coinbase learned of the lawsuit, and the company’s stock fell even further
- Taking into account the initial $86,500 spent buying the puts, Bloomberg calculates that the trade generated $2.6 million in less than a day. could have brought in if the investor held out through the slump on day one and closed at the right time
The potential lucky break is the second suspiciously timed trade in recent weeks. In a separate Bloomberg analysis It was discovered that a savvy investor placed a large options bet that shares of Equitrans Midstream Corporation would soar just days before a surprisingly favorable provision was included in the debt ceiling agreement. And sure enough, the stock went up and it looks like the trader has around 7.5 million US dollars (about seven million euros) for his efforts.
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