Once Again, I blew it on Microstrategy
by JDH on August 24, 2024
I have a long history of doing covered-writes on MSTR—Microstrategy Inc. The concept is simple: I sell out-of-the-money call options, and on their expiration date, they expire, and I pocket the premium.
Simple.
Except it’s not so simple with Microstrategy.
On Tuesday, August 20, with MSTR trading at around $140, I sold calls with a strike price of $148, expiring on August 23. My reasoning was simple: What were the chances that in less than four trading days, MSTR would go up by over 6%? That’s a big increase in four days.
Well, you know what happened. Fed Chair Jerome Powell said, “I’m lowering interest rates to increase liquidity,” and we were off to the races. Bitcoin was up almost 6% on the day, and MSTR, being a leverage play, closed the day at $150.01, up just over 12% on the day and up over 7% since my covering.
I could have bought the calls back earlier in the day for a 50% profit, but I didn’t, and I was stuck with a big loss.
(Of course I still own the underlying stock, so I didn’t have a net loss, but my gains were not as large as they otherwise would have been if I had just held and done nothing else).
As I write this Bitcoin is now comfortably above $63,000 USD, which is a reasonably significant resistance level. We’ll see if it holds.
For now, I hope I learn my lesson and just hold.
But probably not.
Have a good week.
Once Again, I blew it on Microstrategy
by JDH on August 24, 2024
I have a long history of doing covered-writes on MSTR—Microstrategy Inc. The concept is simple: I sell out-of-the-money call options, and on their expiration date, they expire, and I pocket the premium.
Simple.
Except it’s not so simple with Microstrategy.
On Tuesday, August 20, with MSTR trading at around $140, I sold calls with a strike price of $148, expiring on August 23. My reasoning was simple: What were the chances that in less than four trading days, MSTR would go up by over 6%? That’s a big increase in four days.
Well, you know what happened. Fed Chair Jerome Powell said, “I’m lowering interest rates to increase liquidity,” and we were off to the races. Bitcoin was up almost 6% on the day, and MSTR, being a leverage play, closed the day at $150.01, up just over 12% on the day and up over 7% since my covering.
I could have bought the calls back earlier in the day for a 50% profit, but I didn’t, and I was stuck with a big loss.
(Of course I still own the underlying stock, so I didn’t have a net loss, but my gains were not as large as they otherwise would have been if I had just held and done nothing else).
As I write this Bitcoin is now comfortably above $63,000 USD, which is a reasonably significant resistance level. We’ll see if it holds.
For now, I hope I learn my lesson and just hold.
But probably not.
Have a good week.