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Cash In on Longfin Corp After an Insane Crypto Rally

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United States Supreme Court Justice Potter Stewart famously set his standard for obscenity in 1964 with the phrase "I know it when I see it." In a similar fashion, the recent 100% rally in Longfin Corp (NASDAQ: LFIN ) over the past 10 trading days has reached my threshold for an obscene rally. LFIN has become the latest poster child for the out-of-control Crypto craze. The time has come to take a prudent short position in Longfin stock.

An attempt to justify the stock price of LFIN anywhere near current levels on a fundamental basis is simply ludicrous. The announcement on Dec. 18 that Longfin was acquiring cryptocurrency company Ziddu.com was the impetus behind the insanity. The market cap is fast approaching $5 billion for a company that had last reported sales of $9.27 million for Q2 of 2017.

The company came public last December at $5 per share and quickly traded up to $142.82 intra-day before crashing back to $41 only three days later.

Longfin stock is simply a short squeeze of epic proportions. Look for a brutal sell off in the shares over the coming weeks.

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A look at the chart shows that LFIN is now back near the all time closing high of $72.38. Longfin has rallied 9 out of the last 10 days with the overall gain in that time period exceeding 100%.

Overbought is an understatement, with LFIN trading at over 90 on a 9-day RSI basis. Given the magnitude of the rally, the impending reversal in Longfin stock will most likely be swift and sudden.

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Longfin stock has a very small float, which makes shares of LFIN virtually impossible to borrow-and therefore very difficult and dangerous to short outright. This sets up ideally for the short squeeze scenario just witnessed. It also sets up ideally for a defined risk option strategy that will profit from a return to sanity in Longfin stock. Since the stock is nearly impossible to borrow, the implied volatility on the puts is at at a huge premium to the calls. This favors option spread strategies in structuring a bearish opinion.

Longfin Stock Trade Idea

Buy LFIN May $55 puts and sell LFIN Mat $45 puts for a $4.50 net debit.

Maximum risk on the trade is $450 per spread. Ideally LFIN closes below $45 at may expiration to realize the maximum gain of $550 per spread (122%).

Tim may hold some of the aforementioned securities in one or more of his newsletters. Anyone interested in finding out more about Tim and his option-based strategies can go to https://marketfy.com/item/options-and-volatility.

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The post Cash In on Longfin Corp After an Insane Crypto Rally appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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