Barron's checked in on Microstrategy (MSTR), oops make that Strategy, and apparently things aren't going well in terms of its stock price. Of course Strategy is the first "Bitcoin treasury company." The short version is the company has issued a lot of convertibles and preferreds to then buy more Bitcoin.
Bitcoin has taken a a hit lately, sort of catching a bad cold while MSTR caught flesh eating disease and the 2x Long MSTR ETF caught flesh eating disease and then was decapitated.
The Strategy YieldMax fund clocked in with a 73% decline. STRD is one of the preferred issues.
We haven't mentioned it here yet but in December it was reported that Strategy raised dollar reserves by diluting its common stock. I thought they said they'd never do that but they need the cash to cover payouts on some of its debt and dividends on other issues.
It is more than ironic that they are safeguarding with fiat currency.
Here's a fun nugget.
In case you haven't been following along, "Bitcoin yield" isn't a real thing, it's a made up term. For the life of me, I don't know why anyone would want to take on this sort of risk.
Marketwatch
reported on a finfluencer with the nickname Captain Condor who has a 1000 followers/subscribers who mimic his 0dte iron condor option strategy. An iron condor sells a put spread below the market and a call spread above the market. As Marketwatch reports it, the trade as the Captain was recommending it went on a run of losing money and with each loss, they kept doubling down like a version of the Gambler's Fallacy, Martingale
bet, that ended with a "catastrophic" loss on Christmas Eve.
The money involved is serious at the individual level and in aggregate, so much so that at times the group moved the market. I think there was an implication in the article that market makers proactively traded against them which might have contributed their downfall. We're talking retirement money wiped out, that type of scale.
A guy I follow on Twitter once said that doing farmers carry builds slabs of muscle. I think about turning that to gobs of money in the options market. Farmers carry may build slabs of muscle, but the options market does not give away gobs of money.
Both buying and selling volatility is tricky and as this latest story shows, there are catastrophes now and then. You might remember the XIV ETF which sold volatility and blew up (had to shut down) in February 2018 as a result of what has been referred to Volmageddon (I think Eric Balchunas gets credit for that one).
A something, VIX ETF, put selling fund, covered call ETF that "yields" 80%, that goes to zero doesn't have to be a catastrophe when sized correctly. Correct sizing comes from understanding the market that the product is in as well as the actual strategy of the fund. Successful engagement in markets means understanding risk tolerance an then building appropriately toward that risk limit. The XIV product was very successful until it wasn't. "Risk happens fast" which makes sizing so important.
Something pretty fun, the local indoor football team is selling ownership stakes.
We've talked about this sort of thing before. I'm not being facetious, it would be fun but I think the mindset here needs to be that of spending money, not investing it. Sure, "lend" money to a relative just don't expect to get it back.
We've had quite a few minor league and secondary league teams here but they don't stay long. There will probably be more of this. There are investment companies that buy up stakes in this sort of thing but I don't believe any of those companies have shares trading on public markets, please leave a comment if you know otherwise. This one isn't really even risk, it's spending money. Maybe I'll go buy a t-shirt though, the logo is cool.
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