Bitcoin has defied gravity this year, and it's taken one retail stock along with it.
Shares of Overstock.com are on pace for their best year since 2004, largely due to the growing interest in cryptocurrencies, but some market participants are wary of the stock continuing its run.
In January 2014, Overstock became the first U.S. merchant to accept bitcoin, but in late July the company announced it would accept other forms of digital currencies and the stock has been on a straight line up ever since.
The company's involvement with cryptocurrencies deepened in September, when it announced that one of its subsidiaries, tZero, would enter into the digital coin trading business with a joint venture that utilizes initial coin offerings and blockchain technology. The stock surged on the announcement; since then the shares have rallied 122 percent alone, making its year-to-date gains a whopping 198 percent.
Overstock plans to raise up to $500 million in an initial coin offering (ICO) expected next week, lasting until year-end.
Before the recent run, the stock had been consolidating for about a decade. On Thursday, the stock soared 31 percent after its earnings report released Wednesday evening.
In a note to clients on Thursday, D.A. Davidson analyst Tom Forte said Overstock shares could surge more than 60 percent if the company decides to focus more so on its foray into bitcoin
At this point, there are several cautionary signs surrounding the recent boom, said Larry McDonald, founder of the Bear Traps Report.
"If you look around the Street in terms of the opinions of the analysts ... there's one analyst that covers the stock. That's dangerous for any equity investor, forget about Overstock. And this summer that analyst had a $25 price target, and the stock is now double that price," McDonald said Thursday in a "Trading Nation" segment on CNBC's "Power Lunch."
Furthermore, McDonald isn't keen on the company's involvement in the cryptocurrency space boosting its stock.
"If you go back to the dot-com era, go back over the last 30 years, from time to time there's a phenomenon like cryptocurrencies today, dot-coms in '99. And just because you move into a space doesn't necessarily mean you can have a sustainable, higher multiple just because you're going into a new sector," he said on "Power Lunch."
Options in the name are quite expensive, and did not correctly anticipate the strong move on Thursday after its earnings report, said Dennis Davitt, portfolio manager at Harvest Volatility Management.
"You look at the volume in this stock yesterday, prior to this big move, and it was all put-buying in the stock. So that was completely wrong. What we're seeing now is all call-buying in this stock. And you know if they stay true to form as yesterday, the options guys are not the place to look for any insight on this stock," Davitt said Thursday on "Power Lunch."
He wouldn't be a buyer of options in Overstock, he said, adding that "if you have an opinion in this stock, get long it or get short it, and then sell the options against it to lower. This is one of the few areas in volatility nowadays where we have a 100-plus volatility in an underlying asset. They're going into bitcoin, so all bets are off."
Shares of Overstock were up nearly 2 percent in Friday trading.
— CNBC's Evelyn Cheng contributed to this article.
Disclosure: Neither Dennis Davitt nor his firm have positions in Overstock.