9 hours ago
Circle Stock At 60% Safety?
An illustration shows the USD Coin logo displayed on a smartphone in Suqian, China, on March 13, ... More 2025. (Photo Illustration by Costfoto/NurPhoto via Getty Images)
Circle Internet Group (NYSE:CRCL) has been one of the most exciting fintech IPOs in recent months. Since its debut at $31 per share in early June, the stock has surged to current levels of almost $240 - an 8x gain. Missed the surge? Don't worry. There's still a smart way to potentially profit from Circle's long-term growth, with a built-in margin of safety and returns far better than cash or bonds. With crypto back in vogue and much-anticipated stablecoin regulation bill clearing the Senate, investors may be pricing in too much, too soon. But what if you could get in at a 60% plus discount - say, around $100 a share? Now we're talking.
If that price sounds like a bargain and you've got some dry powder, here's a clever trade to consider.
The Trade: 20% yield at 60% margin of safety, by selling Put Options
CIRC stock is trading at about $240. You can sell a long-dated Put option expiring June 18, 2026, about a year away, with a strike price of $100, and collect roughly $1,965 in premium per contract (each contract represents 100 shares).
That's a 19.65% yield on the $10,000 you're setting aside for the possibility of buying the stock in just 12 months. Plus, don't forget, this cash parked in a savings or money market account will earn an extra 4% per annum. So we're talking about an overall yield close to 24%. Separately, see Is COIN Stock A Buy As Stablecoin Bill Clears The Senate?
And here's the kicker. You're agreeing to buy Circle stock at $100, a roughly 60% discount to the current market price, only if the stock drops below that level by the expiration date. The strategy is reliable because large institutions have tested the strategy at scale, and for the right long-term investors, it may serve just right. As an aside, market leadership is in fact one of the factors we consider in constructing the market-beating Trefis High Quality portfolio (HQ) - a strategy of 30 stocks that targets long-term value creation. HQ has outperformed the S&P 500 and achieved returns greater than 91% since inception.
Sure, I see the 24% return, however, what if Circle drops more than 60%, isn't there some risk?
Of course, there is risk. Because, there are two ways this could unfold:
In short, you win either way, especially if you're comfortable owning a high potential company like Circle for the long haul.
Is that a good deal though?
It could very well be, if you consider a couple of facts:
If you do end up owning CRCL stock, you're not stuck with some speculative stock. You're holding a company that is:
And The Risk of a Crash Is Lower Than You Think
Selling puts is only as good as the business you're willing to own. While Circle stock is certainly expensive, its fundamentals are not too bad.
The Bottom Line - Margin of Safety
This trade offers an asymmetric risk-reward setup, with a built-in 60% plus discount.
Either way, you come out ahead.
Preserve & Grow Wealth With Risk-Focused Quality Portfolios
These are the kinds of margin-of-safety setups and asymmetric risk-reward tradeoffs that we seek in the Trefis HQ portfolio, which is focused on long-term value creation. With a collection of 30 stocks, it has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
