From 2024 to date, BTC spot has risen by 140%. Why has MicroStrategy (hereinafter referred to as MSTR), which relies on trading BTC for a living, surged by 236%, and skyrocketed by 1350% since 2023!

MSTR's recent gains far exceed those of COIN, MARA, RIOT, and BITI. After a 16% surge to a new high on Friday, it continued to rise nearly 6% in pre-market trading today.

The reason for the surge: a leverage game?

Borrowing, issuing bonds to buy BTC theoretically falls under "borrowing money to trade stocks." Even more astonishing, while some are borrowing money, MSTR has designed a "no decline" rule:

In mid-September, MSTR increased the scale of its private placement of convertible preferred bonds maturing in 2028 to $875 million, with an annual interest rate of only 0.625%. The initial conversion rate is about 5.45 shares for every $1,000 principal, equivalent to an initial conversion price of about $183.19 per share, which is a 40% premium over the stock price at that time (approximately $140).

With the risk-free interest rate above 4%, being able to finance at less than 1% indicates that the buyers of the convertible preferred bonds are also very bullish on MSTR.

Conversely, when a bear market arrives, MSTR will also suffer significantly, with the last bear market seeing a decline of 90%.

It is worth mentioning that recently, well-known investor Guo Yu has repeatedly expressed optimism about cryptocurrency concept stocks and MSTR:

Appendix:

MSTR has a rich array of leveraged/inverse ETF products

• $MSTR 2X Long ETF(MSTU.US): 2x long MSTR, providing 2x positive volatility for MSTR daily;
• $Daily Target 2X Long MSTR ETF(MSTX.US): 1.75x long MSTR, Provides 1.75 times positive volatility for MSTR;
• $MSTR 2X Short ETF(MSTZ.US): Two times short MSTR, providing two times negative volatility for MSTR daily;
• $Defiance Daily Target 2X Short MSTR ETF(SMST.US): 1.5 times short MSTR, providing 1.5 times negative volatility for MSTR daily;
• $YieldMax MSTR Option Income Strategy ETF(MSTY.US): MSTR covered call option strategy ETF, this ETF will sell out-of-the-money call options on MSTR while buying the underlying stock. Since selling call options collects premiums, MSTY can distribute part of the income to ETF holders, providing some income during sideways price movements and limited protection during declines.

Options Trading Situation

MSTR's stock price broke its historical high last Friday, with total trading volume exceeding 750,000 contracts, a 165% increase compared to the one-month average, with a put/call trading ratio of 0.72; among them, the call options expiring on October 18, 2024, with a strike price of 257.5 surged by 1100%.

Options Terminology Explanation

Implied Volatility:

• Represents the market investors' expectations of future stock price volatility, which is actually an unknown quantity.
• By using a certain options pricing model, factors such as stock price, option premium, interest rate, and time to expiration are substituted into the pricing formula to derive the implied volatility
• It reflects the valuation level of options to some extent, under other conditions being equal:
  • When implied volatility is at a relatively high level, option prices are more expensive (for assets with little price fluctuation, 30% may be considered high volatility);
  • When implied volatility is at a relatively low level, option prices are cheaper (for assets with significant price fluctuations, 80% may still be considered low volatility).

Put/Call:

• The ratio of Put option trading volume to Call option trading volume; the smaller the ratio, the greater the bullish sentiment.

$Strategy(MSTR.US)$Coinbase(COIN.US)$Mara(MARA.US)$Riot Platforms(RIOT.US)$iShares Bitcoin Trust ETF(IBIT.US)@Guo Yu