Bloomberg Intelligence analyst Athanasios Psarofagis stated: “Quantum computing is experiencing the same momentum as the AI field did last year. Many quantum stocks are not widely held by ETFs, making QTUM the only pure play option.” Psarofagis predicts that more quantum-related ETF applications will be submitted for listing soon.
In the final month of 2024, U.S. quantum computing stocks continued to soar. Rigetti Computing (RGTI.US) surged 36% at Thursday’s close. D-Wave Quantum (QBTS.US) gained 24%, Quantum Computing (QUBT.US) rose 12.5%, and IonQ Inc (IONQ.US) climbed 8%. Meanwhile, Arqit Quantum (ARQQ.US) skyrocketed 50% by the close.
Seeking Alpha analyst Joseph Parrish noted that while Rigetti shows potential, investors must remain patient to see those results materialize.
“Rigetti gives us hope for the popularization of quantum computing, but I believe this possibility won’t materialize until the end of the decade. In the meantime, companies needing to raise capital will face numerous risks,” Parrish explained.
James Foord, head of The Pragmatic Investor, highlighted IonQ’s financial stability:
“IonQ is financially healthy, with no debt and $360 million in cash, reducing the risks of equity dilution or bankruptcy, even though the company operates at a loss.”
Foord added: “Among publicly traded quantum stocks, IonQ has the most compelling fundamentals, along with superior technology and a robust development roadmap. Unlike other companies in the sector, IonQ is already providing quantum computing services to customers via most major cloud providers.”
The Surge in Rigetti and the Case for Short Call Options
Rigetti Computing (RGTI.US) recently soared over 42%, with options volume reaching 429,000 contracts, an increase of approximately 168,000 contracts from the previous day. The call-to-put ratio stood at 62.7%, and implied volatility hit 14.72%. The most active options were call contracts expiring this Friday at the $15 strike price, with nearly 22,000 contracts traded.
Short Call: A Winning Strategy for High-Volatility Markets
In highly volatile and high-risk markets like quantum computing, the Short Call (selling call options) strategy can be an effective trading tool. This strategy allows traders to earn premium income by selling call options. If the underlying asset's price does not exceed the strike price upon expiration, the trader can maximize profits.
Case Study: Short Call Strategy for RGTI
Suppose we choose a call option expiring on January 24th for RGTI, with a strike price of $17 and a premium of $22. The following outlines the strategy:
Position: Sell one RGTI call option, earning a premium of $22.
Maximum Profit:
If RGTI's stock price is $17 or lower at expiration, the trader does not need to deliver shares and retains the $22 premium as pure profit.Maximum Risk:
If RGTI’s stock price is significantly above $17 at expiration, the trader must deliver shares at $17, incurring a loss equal to the difference between the market price and the strike price, minus the $22 premium. As the stock price rises, the potential loss becomes theoretically unlimited since there is no cap on how high the stock price can go.
When to Use the Short Call Strategy
The Short Call strategy is most effective when the trader expects the underlying asset’s price to remain flat or decline slightly by expiration. In RGTI’s current high-volatility scenario, if the trader believes its recent price surge is a short-term phenomenon, the Short Call strategy can effectively capture this expectation.
Conclusion
The quantum computing industry holds tremendous potential but comes with significant risks. By employing the Short Call strategy, investors can take advantage of high volatility while managing their risks. However, as the option seller, it is crucial to have a strong understanding of the underlying asset’s price movement and implement robust risk management.
This analysis aims to provide a practical tool for investors to generate returns in the quantum computing sector.
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