**** not financial advice, post is for entertainment purposes only **** exciting time for bitcoin... we're on a bullish trajectory for the next 12-14 months, my base case top price is $300k/btc, but would not be surprised if bitcoin goes to $500k and higher But this thread is not for bitcoin, it's for mstr options, specifically weeklies Some disclaimers, disclosures I'm not an options expert, i can only discuss CC's and no spreads or butterflies or IC's If others want to discuss other options strategies, it's encouraged even if I'm unable to participate I'm a permabull on mstr (and bitcoin) and believe 1,000 shares of mstr currently (used to be 100, but 10 to 1 split occurred) will be worth $10M within 5-10 years My time posting on ET is limited, I'll be a lurker after bitcoin hits $100k or 12/31/2024 whichever comes first Recommendations, not financial advice Do not risk your base (got that from the video below), mstr options are a very volatile trading instrument All plays should not have the risk of negative life-change, but it's ok for positive life-change, i.e. asymmetric risk-reward background thread, if interested Three timelines occurring in present time (please don't mention movie title, no spoilers) Hot potato, 1-3 month time horizon, this is what the thread is all about Short-term degen, long-term permabull (I participate on this timeline holding mstr call options to sell 2nd half of next year 2025 and switch to last timeline below) Permabul hodler mstr shares 5-10 year horizon to the moon (post above self-explanatory) mstr is a high-volatility stock, especially with the bitcoin bull market on the move, but there's some stuff that could feed onto this volatility so that it stays high 1. ATM share offering $21B, already active now (more info on the video below) 2. Convertible-debt offering $21B, will be announced at mstr press releases and size 3. The numbers could increase depending on market appetite (more info on video below) Even as I am currently on Timeline #2, I will switch to Timeline #3 and will be able to participate on Timeline #1 (thread options mstr CC weeklies) Strategy below Owning 1000 mstr shares, start out with a risk of 300 shares to be called away per week (3 CC's to sell to open), if called away, wait for dip buy back 300 shares, wait for rally, sell to open 3 CC's again weeklies For example, purchased 1000 mstr shares yesterday on a dip, and (we're not going to wait for a rally) sell to open 3 CC's for ~$12.50/ea mstr 420 Nov 22 calls, 24 delta, 185 IV, underlying at $341/share Thoughts on the viability of the strategy? or any improvement Video mentioned few times above (suggest watching at 1.75x speed)
Writing covered calls in a bullish market/issue is a good thing. It may not be the BEST thing at times during an upside acceleration, however.
I don't fully understand what the goal is here but MSTY already uses weeklies I believe to achieve their "IV as dividend" strategy. I checked the MSTY holdings and here is what they hold: MSTR US 11/15/24 C255 32.5K MSTR US 11/08/24 C310 31.1K MSTR US 11/15/24 C325 1.3K MSTR US 11/15/24 C290 -1.3K MSTR US 11/08/24 C255 -31.1K Mstr 11/15/2024 255.01 P -32.5K It seems different than the traditional strategy of owning the stock & selling calls on it. Last month their spot dividend yield was 13.6%. Most likely it will be close to 20% this month. The strangest thing about this ETF is they don't own the stock or a stock swap equivalent.
I actually remembered msty does similar to the thread's goal I suppose from my perspective, there is much more control doing it manually In my example, 1000 shares of mstr but only selling 3 CC weeklies 30% out of the money $3750 "income" credit, it's only worth $1920 today, if before close Friday 11/15, I can buy back the 3 short calls for less than $1500, I would do so This would mean no short calls, fully long the shares going into the weekend Bitcoin went up last weekend (rumor of a nation state buyer), which if it happens again this weekend would be a "negative" to being short 3 CC's ================ tl;dr selling 30% ootm CC's for income but trading actively to manage position sizing (30% of mstr holdings exposure to being called away) and some level of control over timing the ups and downs of the underlying mstr stock such as buying back the short calls or letting the stock get called make the 30% stock appreciation plus the CC premium and buying back the shares on a dip vs buying msty and letting the fund do it for me but no control
msty looks to me like they are using call spreads, the negative put has the synthetic long shares, long call? Not an expert, the call is long shares long put synthetic?
With options there is always more than one way to achieve a desired outcome, and others will have alternative approaches. I'm assuming you prefer to retain your MSTR stock @johnarb and have a couple of thoughts as someone new to MSTR but been selling weekly CCs for years on a portfolio of stocks in a pension. Selling 3 contracts for one expiry date will hurt when underlying spikes - especially with 1 DtE - so spread your sales across expiries. Think in terms of delta, not moneyness. At 340 spot, your 30% OtM is: c.16 delta for 22/11/2024 expiry (6 DtE) c.24 delta 29/11 (13 DtE) c.30 delta 06/12 (20 DtE) Your stock means you are long 1000 delta, and selling one of each of those three contracts would be short 70, so net long 930 delta for your portfolio. Selling 10 AtM (50 delta) would be short 500, so net long 500 delta By selling at fixed delta across multiple expiries, and following your rule on rolling, you may find it easier to accrue 'income' and manage instances where price of the underlying rises towards (or beyond) your strike(s). So consider selling in tranches e.g. 2 each week 5 weeks out, and if your rule is tested, roll out at same delta, 5 weeks out. It follows that you will be less busy managing the positions and rolling, the further out you go, so consider that aspect too. Perhaps start selling at 25% delta, (20/12/2024 530C at c.19 credit if going 5 weeks out) and rolling at 40% delta. The example of 2 contracts 5 weeks out would bring in USD3800 gross per week. As you get comfortable, you might move delta out when bearish, in when bullish, but try to retain the same delta across your portfolio. With a portfolio of stocks, you might use volatility or something else to alter StO delta, but obviously less relevant for one stock. Remember that every roll will be subject to a cash credit (ideally) or debit, but accompanied by unrealised P&L in the underlying. So also consider tax implications.
I don't yet hold 1000 mstr shares at this time, i hold call options that are DITM that I plan to sell to close next year mid August/2025 or later After closing call options position, I plan to purchase 1,000 shares of mstr and hold for 5-10 years or even longer if another split occurs, before I sell my options, the number of shares will be adjusted higher, i.e. another 10 to 1 split, would mean I would be purchasing 10,000 mstr shares The example on the OP was hypothetical given mstr current price the mstr 11/22 strike price 420 (8 dte) when I started the thread, it was selling for $12.50/ea when mstr was trading at $341, the IV was very high 186%, has since come down according to my options calculator 171% but this is why even as I plan to hold mstr shares for long term 5-10 years after purchase, an 8 days CC selling 3 contracts for $3,750 is very lucrative side hustle and the risk of getting called away on 300 shares means $80/share additional profits,, yes even as mstr rallies that much, it should not be too difficult to time a dip and buy back the 300 shares for cheaper or not much more expensive I am expecting for mstr shares to be above $700/share in mid Aug/2025 so instead of selling 3 CC's, it might only take 1-2 CC's to achieve a side hustle income of $3500 for a week's worth of risk of getting called away It seems too good to be true, but these are what I see on the mstr call options weeklies, outrageous premium and I guess I'm counting the eggs for when I have the 1000 mstr shares and very tempting opportunity for CC weeklies if IV stays very high which I do expect it to be as I mentioned on the OP mstr planned $21B ATM share offering and $21B convertible debt offering
I am still in mixed emotions on MSTR. Particularly since smart money far more advanced than me will debate MSTR on opposite ends of the trade. The same thing goes for TLT. Hence, aside from a few small 'educational' trades here and there, I have 0 conviction. Perhaps a little to the upside for MSTR...