Coinbase And Alpha Metallurgical: 2 Low Volatility Option Trade Ideas Yielding 10%+

Summary:

• We like selling put options on high-quality stocks, due to the flexibility, yield, and volatility advantages vs other asses classes real estate, BDCs, or MLPs.
• Selling puts involves agreeing to buy a stock at a set price if it falls below that price, earning a premium as potential profit.
• Trade idea #1: Sell Coinbase $115 Dec ’25 put options for $15/share, offering a 13% yield and -52% breakeven.
• Trade idea #2: Sell Alpha Metallurgical $150 Jan ’26 put options for $16.75/share, offering a 10% yield and -34% breakeven.

In case this is the first article of ours you’ve read; we’ll say it right off of the bat – our preferred method for generating yield in the markets is by selling put options on high-quality stocks.

While some investors lean towards real estate, BDCs, or MLPs to generate income, we find that selling put options offers a number of unique advantages, like strong yields, reduced volatility, and improved odds of success on each individual trade. For example, when buying a stock, statistically, you’ve got a 50% chance of profit over any given time horizon – the stock can either head higher or lower.

However, selling OTM put options can give you much higher odds of success, in exchange for capped potential rewards. In many cases, this tradeoff can be worth it.

Here’s how it works: when you sell a put option, you commit to buying a stock at a predetermined price if it drops below that level before expiration. In exchange, you receive a cash premium, which is your ‘max profit’ on the trade.

Here’s the ‘thing‘ that makes this so powerful – when you sell a put, you keep the premium, and only acquire the stock if its price falls. In our view, this can often create a win-win scenario for investors – it’s like getting paid to ‘bid lower’ for shares.

Today, we wanted to explore two unique “short put” trade ideas that you can execute right now in the markets. With strong yields, low volatility, and attractive breakeven points, we think they present solid capital allocations in the coming years, despite the limited profit potential.

Let’s jump in and explore these separate trade ideas more closely.

Trade #1 – Coinbase (NASDAQ:COIN)

Idea – Sell the $115 strike, December ’25 put options for $15 a share, or $1,500 a contract.

R/R – This premium represents a 15% yield over the next 422 days, which annualizes to ~12.97%:

• Yield: $1,500 / $10,000 (capital required to maintain the position) = 15%
• Annual Multiple = 365.25 (1 year in days) / 422 (DTE) = 0.86.
• Annualized Yield = 0.86 * 15% = 12.97%

The trade also has a -52% breakeven, meaning shares would have to drop by more than half for an investor to lose money by expiry.

Notes – If you want to see our most recent coverage on Coinbase, click here.

However, if you want the abbreviated version, COIN has done a great job over the last few years of diversifying revenue sources, moving from a strictly transaction-based business towards a fully featured digital asset & services company:

Subscription and recurring revenues, especially stablecoin revenues, have grown to be a substantial portion of the business, which should buttress the company against swings in the crypto market going forward.

We expect this to continue. Plus, as margins improve (as a result of top line revenues accelerating against a relatively fixed cost base), we see significant multiple expansion in the cards.

While shares have gone on a massive run over the last two years, we think the stock is reasonably valued, especially vs. COIN’s potential.

At present, the stock is trading at roughly 37x earnings, which some might see as a bit more on the expensive side. However, as the company is only now coming back ‘into the black’, the multiple stands to fall substantially as financials improve:

Underlying this assumption is a bullish view on the Cryptocurrency ecosystem as a whole, which some do not share. However, as the space grows, we see COIN continuing to grow with it.

If shares were to dip to $115 over the next ~420 days, we would see that as a massive buying opportunity, which would give us the following P/L profile for the short put option trade:

Acquiring shares at the $100 mark would also represent a valuation of roughly 18x – 19x FWD earnings, which looks very, very attractive. On a sales basis, this would represent an entry around 4.5x FWD sales. Historically, this is very much on the lower side of things for COIN, thus, making it attractive as a potential entry point:

All in all, we think the company’s revenue diversity, growth trajectory, and moderating volatility make this an interesting option for allocating your hard-won capital.

Trade #2 – Alpha Metallurgical Resources (NYSE:AMR)

Idea – Sell the $150 strike, January ’26 put options for $16.75 a share, or $1,675 a contract.

R/R – This premium represents a 12.5% yield over the next 448 days, which annualizes to ~10.2%. The trade also has a -34% breakeven, meaning shares would have to drop by more than a third for an investor to lose money by expiry.

Notes – If you want to read our last standalone coverage on AMR, click here.

We haven’t covered the company in more than a year, though, so here’s what we think about the company now after an additional year of earnings reports.

In short, we think AMR continues to be an attractive place to allocate capital.

In case you’re not familiar with the company, AMR is a leading coal miner in the United States, producing primarily metallurgical coal.

Many see the ‘coal’ business in permanent decline, but demand for met coal is actually structurally increasing as it is a core input to the steelmaking process. Thermal coal is the business in decline.

When we last talked about AMR, the company had just reported windfall profits on the back of a global construction boom in 2022 – 2023, which allowed the company to shore up its financial position and streamline returns to shareholders:

However, the key for us is what AMR has done with the spoils from their recent boom.

Below is a picture of AMR’s cash flow statement:

Here, you can see the company has spent a lot of its free cash flow over the last 6 quarters on buying back more than $660 million worth of stock, settling nearly all of the company’s $470 million of debt, and paying just shy of $100 million in dividends.

Remember, the company took home 1.13 billion in free cash flow over the last twelve months:

Thus, when you consider the whole picture, you’ve got a company with essentially zero debt, solid FCF margins of ~29%, and minimal further capex required in the core business.

In the period since the boom, the company has continued to return capital to shareholders in the form of buybacks, although the pace has slowed as a result of the company’s higher share price, declining internal margins, and management’s decision to begin reserving liquidity:

These margin contractions are largely a result of lower prices for the company’s end market output. Mines are fixed cost entities producing variable cost products. As such, margins swing in a cyclical fashion, and the recent slowdown, especially in China, has really dented met coal pricing over the last year.

Thankfully, the company’s financial health is great, and we don’t expect margins to flip into the red, especially as a number of global growth LEIs are beginning to show some signs of a bottom.

Trading at only 6x GAAP PE, we think the stock looks attractive, and looking forward, an entry point with a further 34% discount should only serve to further improve this trade’s margin of safety:

If one was to acquire shares in AMR at only $133 per share, we think that would be an extremely attractive price at roughly 3x TTM P/E, especially given management’s shrewd financial handling over the last few years.

Similar to COIN above, this would be an incredibly attractive entry point given AMR’s valuation history:

Bottom line, we think AMR is a solid place to sell puts given the company’s deep value, liquidity, and counter-cycle potential.

Risks

The risk profile of selling put options in an unleveraged way is basically the same as buying and holding the stock.

Sure, if AMR or COIN go to zero, you may be assigned shares at the original strike, which would be much higher, but functionally, this is the same risk as holding shares in the company on an outright basis.

Still, it’s something to be aware of.

For the COIN trade, the max loss (if shares go to zero) is $10,000 per contract, and for AMR, the max loss would be $13,300 per contract.

On the volatility front, thankfully the options we’ve surfaced above have very low deltas, which means that their day-to-day volatility, as a function of the underlying stock’s volatility, is very low. This has a ‘portfolio smoothing’ effect, which can help from a psychological standpoint.

Summary

So – there you have it; two great option trade ideas in two separate stocks.

We think both COIN and AMR should serve as a great platform for put selling, which gives us a lot of confidence in the underlying trades.

There are some risks associated with this strategy, but on balance, we like the R/R from here.

Stay safe out there!

Cheers~

---

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in AMR, COIN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

---