MicroStrategy Has a High Stock Price, a Fat Premium, and Bitcoin. Here’s a High-Risk Way to Play It.
If you are excited by the record-breaking stock market and believe that buying-the-dip can be a legitimate investment strategy that will drive prices forever, then say hello.
This stock is a great choice for aggressive investors. It seems to rise above the market because of its high price. The company acts as a quasi-proxy to Bitcoin, which is part of its magic. This excitement is great for people who are looking for cryptocurrency opportunities.
(ticker MSTR) Market zeitgeist seems to be well understood by MSTR executives. The company provides cloud services and business software. It recently announced that it would sell bonds in the amount of $400 million to institutional investors in order to purchase more Bitcoin.
MicroStrategy has 92,079 Bitcoins and is worth over $4.6 billion.
MicroStrategy does not appear in this column as a stock. It may be annoying to regular readers who prefer strategic investments with lower risk.
MicroStrategy offers big premiums for investors who are more aggressive. MicroStrategy’s September $660 puts expire on Sept. 3. They were recently trading at $17.74. This means that anyone who is willing to purchase the stock at lower prices can be paid a substantial sum to sell cash-secured put and to agree to buy it at a lower cost.
Is this trade dangerous? Yes. This trade might be the most risky in this column for years. However, aggressive traders will find it attractive because they can pocket such a substantial premium in a relatively short time.
There is a risk that the stock price will fall below the put strike price. Investors can either buy the stock at its strike price or adjust the put in options market to avoid assignment. If the trade fails, drama can ensue.
To minimize the risk of losing cash-secured puts, you can look for puts that are significantly lower than the security price or 30% to 40% below the stock market price.
In these situations, the money sold for the put may be less than what was actually received. However, many institutional investors use this strategy to increase cash flow by using index options and other securities. This strategy is great, as long as there isn’t an extreme drop in the security price. If the index crashes, investors who are ‘teeny’ will have to buy back their positions at loss.
MicroStrategy stock price has fluctuated between $136.89 and $1,315. The stock has increased by 85% in 2021, and 389% over last year.
Many institutional investors remain skeptical about MicroStrategy despite the gains.
Investors have taken 25% of the stock short, hoping it will fall. In anticipation of a stock price drop, they borrowed shares from long-term investors and then sold them.
Stocks with high short interest may appear to be in decline on the surface. High short interest can have a double-edged edge.
If anything happens that propels the stock price higher -like surging Bitcoin prices or favorable news – shorts will often rush to purchase stock and limit their losses. This can push shares higher.
MicroStrategy stock could advance or stay in a holding area for the next few weeks according to the put-sale concept. This trade will be similar to taking candy from a baby if that happens. If it doesn’t, you will still have a Bitcoin proxy.