MSTR's volatility is astonishing! What is the best strategy to ride the upward trend?

Cryptocurrency Market Soars on November 21!

Bitcoin surged past the $97,000 mark and continues to trade within a volatile range.

Major Developments:

1. White House Considering Crypto Policy Role:
   According to insiders, former President Donald Trump's team is exploring the creation of a dedicated White House position for cryptocurrency policy. The team is reportedly evaluating candidates for this role, which would be the first of its kind in White House history.

2. MicroStrategy's Massive Bitcoin Holdings:

   • MicroStrategy (MSTR), the public company holding the most Bitcoin, now has unrealized profits exceeding $14.7 billion from its Bitcoin investments.

   • As of November 17, 2024, the company holds 331,200 Bitcoins, acquired at an average price of approximately $49,874 per coin, with a total cost of $16.5 billion. With Bitcoin trading at $94,400, MicroStrategy’s Bitcoin holdings are highly profitable.

   • The company’s market capitalization exceeded $100 billion for the first time, representing a 650% year-to-date increase. It recently announced an expansion of its convertible senior notes offering to $2.6 billion to fund further Bitcoin purchases.

Strategy for Bitcoin Bulls: Sell Put Options

Investors looking to profit from Bitcoin’s bullish trend can consider selling put options.

Benefits of Selling Put Options:

1. Income from Premiums:
   The primary benefit of selling put options is the option premium, which the seller keeps as long as the underlying asset does not fall below the strike price.

2. Discounted Buying Opportunity:
   If the option is exercised, the seller acquires the asset at the strike price minus the premium, effectively buying at a discount.

Risks:

1. Unlimited Downside Potential:
   If the underlying asset's price drops significantly, the seller may incur substantial losses. For example, if the asset’s value approaches zero, the seller is obligated to buy at the strike price, resulting in severe losses.

MSTR Put Selling Example:

For investors bullish on MSTR, selling puts can generate attractive income.

Case Details:

• Stock Price: $473.83

• Option: Put with a $472.5 strike price expiring November 22

• Premium Received: $2,675

Profit Analysis:

1. Maximum Profit:
   If MSTR's price stays above $472.5 by expiration, the seller keeps the full premium of $2,675.

2. Breakeven Point:
   Breakeven occurs when MSTR’s price equals the strike price minus the premium received:
   Breakeven=472.5−2675100=445.75 USD\text{Breakeven} = 472.5 - \frac{2675}{100} = \text{445.75 USD}Breakeven=472.5−1002675​=445.75 USD

3. Potential Loss:
   Losses begin if MSTR’s price falls below $445.75 and are theoretically unlimited as the stock price decreases.

Risk-Reward Assessment:

• Limited Upside: The maximum profit is capped at $2,675, which may not justify the significant risk.

• High Downside Risk: For example:

  • If MSTR drops to $430, the loss = $(445.75 - 430) \times 100 = 1,575$

  • If it falls to $400, the loss = $(445.75 - 400) \times 100 = 4,575$

Final Recommendations:

1. If you are confident in MSTR's bullish momentum and can tolerate high risk, selling put options can generate consistent income.

2. For a more conservative approach, consider hedging with a lower-strike-price put option to limit potential losses.