Practical Investment Commentary - No Hype

Here’s the one-month Bitcoin chart, as of 7:00 am Eastern time on Saturday, June 14.

It’s almost exactly flat over the last month.

How can that be?  A change of less than 1% in a month? Aren’t a lot of “Bitcoin Treasury” companies buying Bitcoin?  Yes, Strategy Inc. MSTR—Microstrategy Inc., in the last month, has purchased 52,770 coins (you can see the summary on the Strategy Purchases page).  That’s one company, others are buying, yet Bitcoin is flat?  How can that be?

The answer is that others are selling, and those sellers tend to be longer-term holders (or HODLers, in Bitcoin parlance, Hold On For Dear Life).

If you bought Bitcoin five years ago at $10,000, and could sell it today for $100,000, would you?  Perhaps.  Having some fiat money to spend in the real world is nice.

This has hurt Strategy Inc.’s price.  It’s a leveraged play on Bitcoin, and if Bitcoin is flat, why own MSTR?  That’s why, in the last month, MSTR is down 6%.

So what am I doing?

Same as before.  I’m holding my MSTR shares, assuming they will go up over time, but I’m selling covered call options against them to “harvest the premium.”  I’ve been doing it since the beginning of the year, and, as you would expect, the results have been “mixed.”  When MSTR goes on a bull run, I lose money buying back my shares.  When it’s flar or down, the options expire worthless and I keep the premium.

I’m playing with 200 shares; since January, I’ve lost $1,500 on this strategy.  I had significant losses in April, when Strategy was running, but I’ve made money on my trades since mid-May, when MSTR has been flat.  A few more weeks of flat and I’ll break even.

The good news is that my share position is up $9,400, so I would have made more money doing nothing, but I’ve made money overall, so I’m satisfied.

For the last three weeks I’ve waited until Thursday to sell the options that expire on Friday, and I sell them well out of the money.  So, this week, on Thursday I sold the calls with a strike price of $400 expiring on Friday, when MSTR was trading at around $380.  There wasn’t much chance in 24 hours MSTR would go up by $20, so the premium was only 79 cents, but it was free money, so I took it.

This week I may get more aggressive and sell closer to the money, or a day earlier.  We shall see.

So, for now, we watch and wait, and pocket the cash.

Thanks for reading.  See you next week (if anything happens).