As discussed in previous posts, I own shares in MSTR—Microstrategy Inc. (now Strategy Inc., but the ticker symbol has yet to change). To enhance my returns, I sell out-of-the-money covered calls, assuming that, as with all call options, the time premium erodes, and I can pocket that premium.
That strategy works great when the underlying stock trades sideways or up slightly. This week, Strategy Inc. was up around 7%, which isn’t sideways, so my options were well into the money, so I had a choice:
- Do nothing, and have my shares called away, or
- “Buy to Close” the options, and then sell new options a week or two into the future to recover some of my losses.
I chose option B, but it was a losing proposition.
On April 22, I sold the $345 calls, expiring May 2, for $16. However, on April 30, I repurchased them for $39, resulting in a loss of $23 per option. I then sold the May 9 options, strike price $385, for $14 (so on those two trades, I’m down $23, less the $14 I recovered). Of course, the $14 is only a profit if MSTR trades below $385 on May 9. It closed on Friday at $394, so the trade is not looking good.
Of course, there is one “saving grace” in this whole mess: I still own the shares, which I purchased on January 9, 2025, for around $335. They are now trading at $394, so my shares are up significantly. If I were to close out my option position now, I would approximately break even on the options, but I’m up 17% on the shares, which is where I would be if I had done no options trades.
So, it would appear that the correct option was to buy the shares and hold, or stop covering as soon as MSTR ended its consolidation phase, but who knew?
That’s the update, more next week.
My Strategy on Strategy is Getting Out of Control
by JDH on May 10, 2025
Last week, I said the MSTR Covered Call Strategy didn’t Work This Week. Well, it didn’t work again this week, either.
I am trying to “juice” my returns on the shares I own in MSTR—Microstrategy Inc. (now Strategy Inc., but the ticker symbol has yet to change). I sell out-of-the-money covered calls that expire in one to two weeks, hoping that as the time premium erodes, I pocket the premium. It’s a great strategy (no pun intended) with Strategy is trading sideways or down. It’s a bad strategy when Strategy is going up, as its done over the last month. Here’s the six month chart:
As you can see, it traded between $291 and $404 from the start of the year until last week, so selling calls was a great strategy. But in the previous four weeks, MSTR has gone from $240 to $412, which has been a disaster for my strategy. Here’s the summary of my options trades on 200 shares (so two contracts) since the beginning of January:
It worked great for the first two months, but in the last four trades, I’ve had to repurchase the options at a loss to prevent having my shares called away. Assuming the options I sold last week expire worthless (which doesn’t seem likely), I’ll be down almost $2,000 on the strategy. I should have held the shares and done nothing.
The good news is that the underlying shares are up $16,000, so overall I’m good, but again, simply holding was a better strategy.
Bitcoin is now comfortably above $100,000, and will likely keep going until resistance at $108,000, and then we’ll see what happens.
I plan to attempt to extricate myself from this trade. We’ll see if I can pull it off.
Thanks for reading. See you next week.