Market Makers May Be Favorably Mispricing MARA Holdings Options: Here’s How We Know

bitcoin on graph background by NanoStockk via iStock With cryptocurrencies swinging higher after a period of extended consolidation, traders who missed the boat may consider crypto-mining specialist MARA Holdings (MARA). As a digital asset technology firm, MARA stock represents an indirect play on blockchain-derived coins and tokens. Still, this could have its advantages, given that cryptos are susceptible to distinct challenges, such as exchange hacks.

What makes MARA stock particularly intriguing at this hour is that it has been the subject of unusual options activity. Oftentimes, major investors use derivatives to quietly build a position. Also, the nature of options — with their myriad strategies — presents an opaque picture. With a bullish position in the open market, the intention is unambiguous. A rise in call option activity, though, has layers of interpretations.

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Still, it’s always worthwhile to consider Barchart’s Unusual Stock Options Volume, which showcases the top 500 most aberrant transactions relative to prior norms. On Monday, total options volume for MARA stock hit 532,269 contracts, representing a nearly 53% lift over the trailing one-month average. Call volume reached 381,694 contracts while put volume was 150,575 contracts, yielding a ratio of 0.39.

On paper, the higher proportion of calls seemingly represents a positive development. However, it’s always a good idea to check options flow, which filters for big block transactions likely placed by institutional investors. Yesterday, net trade sentiment clocked in at $2,169 million above parity, thus favoring the bulls.

Interestingly, the biggest trade in terms of dollar volume was for $18 calls expiring Sep. 19, 2025. Given that this debit-based transaction carried an ask price of $3.40, MARA stock would need to rise to $21.40 (assuming intrinsic value) to break even. Of course, there could be hidden nuances behind this trade but the overall profile suggests an optimistic posture.

Using Game Theory to Plot a Strategy for MARA Stock

While unusual options represent an important datapoint, it doesn’t necessarily provide a blueprint for the two key components that options traders require in their theses: projected magnitude (y-axis) and timeframe (x-axis). These elements can be inferred but that leaves the broader concept open to a broad range of opinions. To solidify a strategy, traders can use game theory — processes to empirically determine the best time to make a move.

Story ContinuesHowever, like any fair competition, the rules must be the same for all competitors. In this case, the opposing side is the market itself. As such, there’s no reason to give the market an advantage that simultaneously puts us at a disadvantage. One way the equities arena obfuscates the playing field is through the use of share price. Because price is a continuous signal with no defined boundaries, it’s difficult (if not impossible) to conduct statistical analysis on it.

How to remedy this problem? My solution is to convert the chaos of price discovery into market breadth — sequences of accumulative and distributive sessions. Essentially, market breadth answers the root question: at the end of the day (or whatever choice of time measurement), was the market a net buyer or net seller? By focusing on patterns of demand (and “negative” demand), we can more easily identify patterns and their likelihood of transition to different behavioral states.

Conducting the above exercise for MARA stock across rolling 10-week intervals reveals the following demand profile:

| | | | | | --- | --- | --- | --- | | L10 Category | Up Probability | Baseline Probability | Median Return if Up | | 1-9-D | 50.00% | 45.45% | 7.48% | | 2-8-D | 54.17% | 45.45% | 8.53% | | 2-8-U | 25.00% | 45.45% | 22.21% | | 3-7-D | 33.33% | 45.45% | 13.10% | | 3-7-U | 30.00% | 45.45% | 43.33% | | 4-6-D | 57.14% | 45.45% | 6.26% | | 4-6-U | 57.14% | 45.45% | 7.19% | | 5-5-D | 54.76% | 45.45% | 9.98% | | 5-5-U | 45.83% | 45.45% | 10.44% | | 6-4-D | 25.00% | 45.45% | 2.37% | | 6-4-U | 56.76% | 45.45% | 11.53% | | 7-3-D | 50.00% | 45.45% | 14.07% | | 7-3-U | 59.38% | 45.45% | 13.36% | | 8-2-U | 33.33% | 45.45% | 11.95% |

In the trailing two months, MARA stock has printed a 4-6-U sequence: four up weeks, six down weeks, with a positive trajectory across the 10-week period. This sequence is rare, having materialized only 21 times since January 2019. However, the critical takeaway is that, in 57.14% of cases, the following week’s price action results in upside, with a median return of 7.19%.

This is also why I’m not a believer of the random walk theory. If MARA stock was truly random, none of the above sequences would matter as the long-side success ratio would hover around 50%. But that’s not what we see; in fact, some “hands” are clearly more favorable than others.

So, what I’m proposing isn’t some esoteric chart voodoo: I’m simply saying that it may be better to bet when the odds statistically favor you as opposed to the other way around.

Identifying a Specific Trade

Armed with the above intelligence, the 19/20 bull call spread expiring Aug. 8 looks appealing. This transaction involves buying the $19 call and simultaneously selling the $20 call, for a net debit paid of $46 (the most that can be lost in the trade). Should MARA stock rise through the short strike price ($20) at expiration, the maximum reward is $54, a payout of over 117%.

Primarily, what makes this idea attractive is the set of favorable cards shown to the player. As a baseline, the chance that MARA stock will rise on any given week is only 45.32%, a negative bias. However, the 4-6-U sequence tilts the odds favorably for the bullish speculator.

That said, it should be noted that MARA stock can be wildly choppy. Should MARA hit its profitability target prior to expiration, traders should give consideration about exiting the spread early. Sure, that leaves time value on the board, thus eating away at the net profit. However, I would say it’s better to win something rather than to lose anything, especially with a highly kinetic name like MARA.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com

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