Transcription
[Music] Okay, before we head in this week, a few notes for the applied level. Tomorrow is week one for buy-side modeling. Here, we're going to use apartment REITs, specifically out of Canada. Buy-side modeling includes, first of all, stock picking. Then, a deeper dive will see how that is done. There is a difference between sell-side modeling and buy-side modeling. The sell side usually has a small universe; the buy side has to go through hundreds of stocks. How do we get that done? We'll use Canadian apartment REITs to get that done. I don't want to say Canadian apartment REITs because that's the name of a REIT also. Tomorrow, in the applied options folder, in the volatility folder, I will put up a video on gamma trading on MicroStrategy shares, which is the game that is being played by the convertible bondholders. You should know how they play the game; you can play the game too. I'll show you how, although it's not for the faint of heart.
January 15th, the applied level is splitting into two sections: applied analysis and applied asset management, $425 each. This begins January 15th. If you have CFA Level 1 standing, you get $100 off each one. If you are a markmelon.com subscriber, you get another $50 off, so you're down to $275 on each one. I will most likely extend this discount, the $100 discount, if you have any FRM standing or any CIA standing. We do have an FRM subscription on our site; this may also apply to you. I don't know, but I probably will extend the $100 discount if you have any standing in FRM or CIA. Starting January 15th, these are one-year subscriptions, so from January 15th to January 15th of the next year, you get access to the entire content plus any new content I put up as of this date. You have access forever, except the new content would no longer get added, but whatever you have as of this date, you would have. If you want new content after that, it's a $25 a month recurring fee after that to continually get new content.
January 14th will be the end of the applied level at $440 or $320. $320 is the $100 discount, sorry, the $120 off if you have CFA level standing. All subs up to January 15th will have lifetime access, no further fees, which means you'll always continue to get the new stuff forever and ever; it will never end. If you are in before the prices change, you're good. None of this applies to you after that. This is the new series because a significant amount of value has been added to the applied level at this point that this price just doesn't reflect the sheer amount of value that's in there now.
Okay, let's head in. Last week, I talked about MicroStrategy. I'm going to continue it on this week, but we're going to go into detail about what the convertible bonds are doing, some of the comments left under the video last week. Just as an aside, the comments were interesting. If you watched the evolution of the comments throughout the week, I put the video up on Monday, and I mostly got scoffs, you know, "Ha ha ha, you keep making comments and we'll keep making money." Nobody was really rude, just sort of laughing at you because they thought you didn't understand what was going on and you were missing the boat. By the end of the week, the comments had turned nasty and angry, and a lot of name-calling. I had to block one person who was just right angry. I think they were Irish just by the words that they used, but I had to block one person because they were just angry. You don't get that angry without losing money, and by the end of the week, people were losing money on this, and they were just angry at anybody who wasn't saying things they already agreed with. Anybody who was critical of this, they just got angry with sheer rage. Sometimes it was interesting to see the change in tone throughout the week as MicroStrategy took a big dump last week.
But let's understand convertible arbitrage and what the bondholders are doing. When we understand what the bondholders are doing, we'll understand the game a lot better. You will see that if you are a delta trader—delta trader meaning that you buy shares and you want the price to go up—now see that if you're a delta trader, you're playing a random game. Over the next little while, I don't know how long this will last, you will make money, then you will give it back, and you will make money, and you will give it back, and you will make money. Maybe you'll blow up; maybe you won't blow up, but you won't keep a lot of the money you make because you won't understand the game that's being played. You're thinking that you're playing basketball, but you're playing basketball on a soccer field. So every time you pick up the ball, the whistle blows, you get a penalty, and you can't understand why because that's what you're supposed to do in basketball. But again, you're playing the wrong game.
Let's deal with convertible arbitrage. It's a type of capital structure arbitrage, and what it relies on is that in the capital structure, you have senior and junior securities. It usually involves a long position in a senior security and a short position in a junior security. What makes the convertible bond attractive is it has a call option in here, so you can delta hedge the junior security so that you're long a bond and you are delta neutral. You're delta neutral, but you have positive gamma, which is what you're doing; you're gamma trading.
The biggest reason for the convertible bondholders being here is to take advantage of volatility. In fact, with convertible debt, this is the most common reason for convertible debt because with convertible debt, you're getting almost 0% interest, usually very low coupon. The last convertible debt MicroStrategy sold had a 0% coupon only because they have such high volatility. You do have a conversion factor in here that converts to a number of shares. The belief is that that means something, and some of the comments last week were, "Why would large institutions be interested in getting exposure to MicroStrategy shares this way if they didn't believe in it?" Well, they don't care about the conversion feature. The conversion is more of a penalty; they would rather it not convert while volatility is high.
Most convertible bonds have a clause called a forced conversion, meaning that if the shares are a certain percentage above the conversion price for a certain number of days, the company can call the bonds at par, which forces the bondholder to convert because they would lose money. Once they convert, it's like, "Oh well, it's over." They'd be very willing to do more convertible bonds to get back into the volatility game. So the conversion price is not important; what is important is the delta on the call. What initial delta do you want on the call? The higher the volatility, the higher the conversion price can be for a given delta. So they say, "Well, let's start with a delta of 0.4 on the call; that will set the conversion price," right? Because this is what they're interested in here—not the conversion price. The conversion price actually is more of a penalty; they really don't want the shares. It's to take advantage of volatility.
Another motivation is to take advantage of market inefficiency, that is, a mispricing between securities in the same company. It's hard to say that you have a mispricing in securities in the same company. What you can say is you have a mispricing between the equity and Bitcoin, that the value of the equity being 300 and at one point last week over 400 times the price of Bitcoin. You could say, "Well, that's an inefficiency," but that's a cross-asset arbitrage; that's not a capital structure arbitrage. That would be a long Bitcoin, short MicroStrategy trade, and you would short it on a volatility relative basis.
So if the volatility of Bitcoin—I'm going to make up numbers, okay? I'm just making it up out of thin air to give my example. So if you're going to leave a comment saying, "Oh, that's not the volatility of Bitcoin," I'm just making numbers up out of thin air here. Let's say the volatility of Bitcoin was 50%. Let's say the volatility of MicroStrategy was 150%. You would go long $30 of Bitcoin and short $10 of MicroStrategy stock. You would do it such that you were as volatility neutral in your long and short positions as possible. So that is an arbitrage trade from Bitcoin to MicroStrategy shares for market inefficiency and capital structure.
The convertible bond would have to be mispriced based on where the stock is and where the conversion feature is. That's really not a motivation here. This is it right here: take advantage of volatility. What provides the volatility for MicroStrategy shares is a combination of two things. Number one is that you do have shares that are trading at a ridiculous premium to its net asset value, and you have a story that you can feed potential traders of the stock that they buy into that story, and you convince them that they're playing basketball even though you know this is a soccer field. You convince them that they're playing basketball.
Well, talk more about that on the next screen. Let's look at how convertible bondholders make money. If they don't really care about the stock price and they don't care about the conversion factor and they don't care about the Bitcoin—which they don't—they really don't; they only care about the Bitcoin in as much as it provides credit protection. How do they make money? These are the last bonds they issued were 0% convertible, which means there is no coupon. If there was a coupon, if anything greater than 0%, they do make the coupon, albeit it would be low. They would make the coupon. The lower the volatility of the stock, the higher the coupon would be because that's what they want. They're not interested in the conversion; in fact, they'd rather it not convert for as long as possible. They're interested in the volatility.
So if MicroStrategy can deliver very high volatility, they can get to 0%. Other companies that have convertible debt have—you sometimes see a 0.5% coupon, maybe a 1% coupon, 6.25%. The lower the volatility, the higher the coupon would be. So if you can deliver very high volatility, you can get 0% money. If there is any premium, the bondholders are going to get the coupon, and they need pull to par. The pull to par can be positive or negative; that's if the price at which they issued the bond does not equal its face value. They would get something there.
This is the big money here, with the volatility yield being the really big one. This is nice right here: the short rebate. So to say there is no coupon, there really kind of is a coupon. So let's say that the convertible bond was issued and they negotiated a delta of 0.4 on the call, on the embedded call. Whatever Black-Scholes-Merton would spit out, you'd put in whatever the implied volatility is, the risk-free rate; it will spit out a strike price. There's your conversion; there's the conversion price on that strike to equal the delta that they want. For every $1 million in bonds, they'll be short $400 million in MicroStrategy shares. That $400 million earns the overnight rate, so they are getting a coupon on the proceeds of the short sale because they are long 0.4 delta, and now they're short 0.4 delta, so their delta equals zero on this one. But their gamma is greater than zero. That's what they want: the gamma greater than zero but the delta equal to zero.
And of course, they are long a bond that is collateralized by the Bitcoin—senior unsecured, yes, but senior to equity, which means they're first in line to all the assets. All that Bitcoin belongs to them, and I'll talk about enhanced credit features that MicroStrategy provides that is being sold to you as a feature, but it's not a feature for you; it's a feature for the bondholders. So the short proceeds will get the overnight rate less any dividends that are paid. Most often, the dividends are zero; companies that issue convertible debt usually don't have dividends, so there usually are no dividends. You would have a borrow fee; whatever the fee is to borrow the shares. The fee to borrow the shares would be very high if the float was low. The fee to borrow the shares would be lower if the float were higher.
So how do you get a very low fee on borrowing the shares? I don't know, split your stock 10 times, and you'll have a whole bunch of shares out there. The size of the float—the larger the float, the more widely it's held, the more liquidity in it, the lower the borrow rate would be. So it would be helpful if the company had a large float. If it doesn't, it can always do a 10-for-1 reverse split. I wonder if that sounds familiar to anybody.
Anyways, they get this, then they get a volatility yield. This is the big one because the call has convexity. I drew this out wrong; let me redraw this. It's the right shape; I just drew it in the wrong place. Anybody from Level 3 who has been through the first two readings of the fixed income readings for immunization will understand the role of convexity in a portfolio. Let's do what—oops, let me try to draw this out a little bit better here. There we go; there is convexity. Let's say that this is the current share price right now, and we'll just draw out vertical here. There's the share price. If the share price doesn't move, convexity is actually a bad thing because you're paying for convexity; you'll underperform. When you have convexity, you want things to move. This is the benefit of having convexity in a bond portfolio. If you're immunizing a stream of liabilities and you expect volatility to increase, what would you do to your bond portfolio? For the same duration, you would attempt to increase the convexity of that portfolio so that it would outperform whether rates went up or whether yields went down. You would outperform the benchmark—the benchmark being the liabilities.
The same thing applies here. The convertible bondholder is long the bond plus a call. The bond plus call will increase in value more than the short position. If you are originally delta neutral and the price really went up, the bond plus the call option would outperform the short position, and you make money. If it really went down, the bond plus the call will decrease by less than the short position; you will make money. Now you understand what the convertible bondholder likes about MicroStrategy. If you want a gamma trade, you need volatility. The more volatility, the more profitable the trade becomes. You need volatility; you don't care if the price goes up; you don't care if the price goes down. The convertible bond is the mechanism by which you can set up the trade. Without the convertible bond, you can still do it with call options in the market; it's just a lot more work to get done. The bond gives you all the leverage that you want.
So if I got to pay a billion dollars for the bond and I get $400 million on the short sale, I'm really only out $600 million at that point, am I not? Right? And if the price of the shares goes up, the delta of the call will go up; I will short more. So then at some point, I'll be short $500 million; I'm really only out $500 million at that point. So you can see that I'm getting a little bit of leverage in there as well. So this is the game being played.
Okay, so let's get to what this would mean for the shareholder. Here is a replication of what I had on the last screen, and yeah, it should look like this. If we're going to draw it out right, this is the price increasing; this is the price decreasing. The convertible bondholders are gamma trading. Delta trading means that you're trading the change in the share price; it's a directional trade. Either you have positive delta and you want the price to go up, or you have negative delta and you want the price to go down. Gamma trading is you just want the delta to change; you don't really care if it goes up or goes down. You're agnostic about the price move; what you want is a price move and a significant price move.
The other thing the convertible bonds want, because if they don't convert, the face value has to be paid back at maturity. The bondholders will go, "Okay, well, give us our money back." Now you're going to need some kind of credit protection because at the heart of MicroStrategy is a money-losing software business. It doesn't generate the money to pay back these bonds. So what is there to pay it back? It's the Bitcoin. You would have to sell the Bitcoin. But what happens if the price of Bitcoin drops? Remember now, I gave you a billion dollars, and you went and bought Bitcoin, but you're not buying a billion dollars of Bitcoin because there's a leak here, right? Usually about 1% in underwriting fees. You got about 1%, so you're not really buying 100%; you're only buying 99% of the value in Bitcoin. But what if Bitcoin drops 10%? I'm kind of in trouble, so I would like you to over-collateralize if you can. Is there any way that you can double the amount of Bitcoin that you have?
Well, okay, what we can do is issue equity at the same time that—in the same quantity we're issuing convertible debt. Is MicroStrategy doing something like that? Yeah, their plan is $21 billion in convertible bonds and $21 billion in equity, and this is to collateralize, to offer credit protection for the convertible bonds. Yes, they're unsecured; that's not the word. The word is senior. They're senior to equity, which is junior. So all of that Bitcoin belongs to the bondholders. So if this all falls apart, all that Bitcoin belongs to them; they sell it off. If there's anything left, you guys can get it.
So let's look at how this works out. Let's start with a delta-neutral position. You bought $1 billion of convertible bonds from MicroStrategy, and you have a call. Let's say the delta of the call is 0.4, and based on the volatility, it sets the conversion price or the strike price. But you have 0.4; you will immediately short $400 million of MicroStrategy stock because you are basically long $400 million on the call. You're delta neutral, but you have gamma in the option, but the short position has no gamma, right? It has a consistent delta; the delta will not change. But the delta here will change by the rate gamma measures the rate of change in delta.
So you are delta neutral to begin with. If the price then goes up, the delta on this will go up; you'll sell more shares at higher prices. So you will outperform, and the value of your portfolio will be higher that day. Yay, we made money! Let's get delta neutral again, so you will short more shares. But notice you're shorting shares on the way up. Watch what happens when the price goes down, and we'll just jump to that now. If the price drops, the delta will drop; you will cover shares at lower prices. So you'll outperform on the fact that you have convexity, and you'll be covering the shares that you shorted at the higher price at the lower price. Thank you very much!
If the price of MicroStrategy is greater than the conversion price, the delta on the call will start to approach one as the price keeps going up and up and up and up and up. The delta on that call will start approaching one, and since you're selling more shares on the way up, the short position will equal the conversion position. So that when the shares are delivered to the bondholders, it basically just covers a short position; they end up with zero position. So the belief that the bondholders are in this because they want the shares? No, they do not; they do not want the shares. They specifically do not want the shares. Once the shares are converted and assigned to them, it basically just covers their short position.
So there is a built-in cover; they're not interested in the shares. The new shares simply just dilute the existing shareholders. The bondholders don't suffer anything on this; the existing shareholders suffer all the downside. You cannot have a situation where you have an asset that doesn't create an income stream, but somehow bondholders make money, shareholders make money, management—everybody makes money from something that doesn't produce an income stream. This is a zero-sum game, which means for somebody to make money here, somebody has to lose money. That's the shareholders.
If the price of the MicroStrategy shares is below the conversion price and they keep dropping below the conversion price, the delta will approach zero. The convertible bond becomes a straight bond, which is senior to the equity, which means it has a first claim on all the Bitcoin, of which the equity bought half the Bitcoin. Thank you very much for the collateral protection. It'll approach the straight bond. The question I have, and I don't have an answer for this, is for convertible bond traders. Sometimes they have a floor under which they won't hedge. By that, I mean they may decide that their floor on hedging is 0.3, that if the delta of the call drops to 0.2 and 0.1, they will not change from 0.3. That is another form of credit protection. What that is saying is that if there's going to be a default on the bond, the short position provides at least 30% downside.
So if this whole thing collapses and the shares go to zero and all the Bitcoin go to the bondholders, the bondholders at least on their short position have 30% of their face value covered. They may have a floor; I don't know. If anyone knows how they would be trading that, go ahead and leave a comment. The typical amount is 0.5; typically, you wouldn't hedge below a 0.5. But this is a unique situation with very high volatility. I don't know if they would even play with the floor or not, being that the Bitcoin is—they're issuing equity to add Bitcoin to the balance sheet so that there's two times the amount of Bitcoin versus the value of the debt. Bitcoin would have to fall by 50% before it threatens the bondholders. That might be enough collateral in there without having to worry about this, but there still might be a floor to the downside. I don't know; that would be interesting if anyone knew what that was.
Here's the best outcome for everybody involved. When I say for everybody involved, it's the best outcome for the shareholders as well if you want to keep this game alive. You have big price swings; you don't really care what direction the market price is. It's not critical; volatility is. This will keep the convertible bondholders in the game. So I'm just going to erase some stuff so I can put a few charts up for you. So this price doing this is okay as long as it does this. A price doing this is okay as long as it does this, and a price doing this is okay as long as it does this. What we don't want to see is volatility start to do this. Even if the price is going up like this, but volatility disappears like this, the game is over because the output, which is volatility, is gone.
It would be like me still showing up to your restaurant and you saying, "Oh, we're out of food; we don't serve food anymore, but come on in and pay and just pay an imaginary bill." It's like, "Well, I'm here for the food. If you don't have the food, what would I come to this place for?" The convertible bond traders are saying, "We're here for the volatility. If you don't have the volatility, we're not really interested; just give us our money back." Well, now that's a problem because if the volatility disappears and you got to get the money back, here's what's going to happen to the share price: it is going to drop very quickly.
So it is not what's keeping the share price up; it's the volatility, not this magic Bitcoin yield that you're being sold. That's just a story that's being told to you. If we listen to Michael Saylor and what he tells you, he's filling you up with a heavy dose of misinformation. In a CNBC interview, he says, "We're making—we're basically making $500 million a day." That is Enron-style math. What Enron did was it had these SPVs, and then it would book all future profit, whether it was real or not, based on their assumptions. They would find the present value of all those future profits and call it profit today. If they wanted more profits, they changed their assumptions.
So what is a better statement that he made last week? "The sale of the convertible debt that we did opens the door to the possibility that we may end up with $500 million more of Bitcoin than it costs us in shares if we'd sold shares today." That relies on those shares on those bonds being converted into shares. In other words, they didn't make $500 million that day; they opened up the possibility that they may get that at some point in the future or may not. They didn't make it that day. To say that you did is to mark to market all of your gains today without the market going in the—without knowing what direction the market's going to go in. That is some Enron-style math that's involved there.
But he did say one thing that's true: "We are selling $1 bills for $3." Now, if you're listening to that, you say, "That is fantastic! What a great business to be in!" until you realize that they're selling these $1 bills for $3 to you. They're issuing equity at a premium to Bitcoin. They're selling $1 bills for $3. That is beautiful for the bondholders. What great collateral! Thank you, thank you, shareholders; you just keep providing us this collateral. The larger and more frequent the move, the greater the gain for the convertible bondholders. If you can keep this alive, let's say you keep this alive and the price is down here, way below the conversion, and you're at expiration, the convertible bondholders will gladly roll over and say, "We'll go another four years; thank you very much." They'll gladly roll over.
You keep doing what you're doing; you keep providing the volatility. If you're delta trading, you're going to get random results. Why? Because you need this thing to move up and down and up and down, and you make money, and you give it back, and you make money, and you give it back, and you make it, and you give it back, and all you blew up. You're playing the wrong game; you got to get lucky. If you're playing basketball on a soccer field, you got to get lucky and hope the ball is never passed to you. As soon as it touches your hands, "Ah, it's a soccer game; penalty!" The game here is gamma trading. The bondholders will be as long as this is here; they get consistent results.
So you got to get smart about the game that's being played. So let's look at the business model for MicroStrategy. Let's look at their output first. What are they selling? They're selling volatility, and they need some kind of operational asset. How are you producing this output that you're selling? Because you have to have a way to produce this output. The operational asset is the MicroStrategy shareholder, and there is a process in which you misinform the MicroStrategy shareholder, and you keep them in the game such that they will continue to produce the volatility you need to sell to the convertible bondholders because that's the game. You are an operational asset; you are the input. You are a depreciating asset. Like any operational asset, there's going to be an estimated useful life, and there's going to be some sort of depreciation that you apply to that estimated useful life, and you'll have a salvage value of whatever Bitcoin is left over after the convertible bondholders get all of their money back.
So the question is, well, what is the useful life of the assets? That's the whole thing about these volatility games: you don't know. You have implied volatility now of 213%. So let's say that it drops to 100%, and let's say the price goes up and you are short shares right now. Well, you're going to lose on the short position, but you're going to gain on the call. However, implied volatility is dropping, so your convexity is going to start to do this, right? So if this is your short position, if implied volatility falls too much, uh-oh, now the game is over. Now you're losing; now you're going to lose.
And if that becomes the case, because everybody knows that's the game, if that's the case, these shorts are going to pile into this very fast because the second type of arbitrage is going to show up, which is long Bitcoin and short MicroStrategy shares down to its net asset value and even lower because you're going to have to pay back those bonds with all that Bitcoin you bought, which means the residual for the shareholders is going to be rather tiny. So what should you be looking at to determine how safe this is to play? You should be looking at the volatility. If volatility on this starts dropping, you're in trouble.
How do you keep volatility alive? Well, if the price is moving in one direction, can we get a short report in on this? Can we get some negative stories? Maybe the Wall Street Journal would be good. Maybe one of the convertible bondholders may call a contact. You know, BlackRock calls the Wall Street Journal, a contact, saying, "Have you looked at how crazy the math is on this MicroStrategy thing? I think there's a story here." And of course, that should send it right back down. And then, of course, you have management that can then, you know, make, you know, go on CNBC, go on Bloomberg, go on stage somewhere and talk about the Bitcoin yield. "We're making $500 million a day; we're selling $1 bills for $3; you know, these institutions want access to us." All somewhat truths, but a heavy dose of misinformation in there and some Enron-style math.
Hopefully, you can get the price to go back up, but you can't have it go in one direction, which means hopefully we can get another short report in here. It would be helpful, you know, the next time if we had somebody that issued a long report. BTI does that for MicroStrategy; it continues to be bullish, which makes no sense when you look at paying 300% of NAV. Even if you had 30%, I grant you, even if you had 30% leverage, I'm just won't even question it because they do all convert, and the bondholders are short. So it's questionable whether there is leverage to begin with. But let's say 30% leverage; you would have a premium of 30% over Bitcoin, not 300% and 400%. No, no, nobody who is an analyst would ever suggest that that makes a lot of sense.
So that is part of your production process. You are not shareholders; you are operational assets. You are depreciable assets. You are assets from which we will extract value for our output for our true customers, which are the convertible bonds. The narrow window in which this works out is the price keeps going up on very high volatility so that the inefficient stock price becomes even more inefficient. You need to be 300% of NAV, 400%, 500%, 600%, and all of these people oblivious, oblivious to the fact and completely drinking the Kool-Aid and sold on the idea that this is going to be incredible. This is going to be a $20 trillion company, and it has to keep going that way or it all falls apart.
When that volatility disappears, you all disappear. This whole thing disappears. This is a one-way bet; a one-way bet. It must work out; it's a one-way bet. Everything else is absolute destruction. If you want to entertain yourself a little bit more, I want you to go to the SEC, go to Edgar, and look up MicroStrategy. Just look for Form 4. Form 4 is insider buying and selling. MicroStrategy has a lot of share-based compensation, so it not only does it sell equity to buy Bitcoin to back up what the convertible bondholders would have as assets, it prints shares for itself at a very rapid pace. So there's another leak that you have as well.
If you look at Form 4, you will see an "A" followed by a bunch of "D's." "A" is acquired; "D" is disposed. So the acquired is your share-based compensation; it's vested. You have now 50,000 shares—sell, sell, sell, sell, sell. It's not a matter of thank you; sell, sell, sell, sell, sell. The next one—call up the next one; same thing—sell, sell, sell, sell, sell. The next one—sell, sell, sell, sell, sell. Look at the sheer number of Form 4s. Why? Because they are selling $1 bills for $3. Why wouldn't they do it? If they really believed in the delta story, they wouldn't be sellers, but they know this is a gamma story, not a delta story.
So yeah, they're more than willing to sell you their shares at a 300% premium to Bitcoin. You give me three bucks, and you'll get a dollar of Bitcoin, and I'll go buy $3 of Bitcoin. Thank you very much! You're getting fleeced in so many ways because you think you're playing basketball. You can't see it. Once you see that this is a soccer field, you'll stop playing the way you're playing. Now I can show you how to trade, how to gamma trade MicroStrategy without the bonds. You don't need the bonds; MicroStrategy has options. You can buy calls yourself, and you can short shares yourself, and you can trade the selection of what strike to buy and what date to expiration.
This requires that you understand theta decay, which if you don't understand theta decay, don't even try to do this; you will get murdered. If you don't understand how volatility stays alive, don't even try to do this. If you have a small account, if you have less than $25,000, don't even try to do this because you will be classified as a pattern day trader very quickly because this does require you to delta hedge every day, sometimes intraday, because this thing does move. What you're hoping for at this point in time is not the price to go up or the price to go down, but for the price to move, and you don't care what direction it moves in. That's how you make money.
If you can do this, you can use leverage. There's where your magic leverage comes in on this particular trade because you're delta neutral. I will put this video up Monday, as I described in the opening screen. I will put it up in the applied level, in the applied options, in the volatility trading folder because this is the purest form of volatility trading, which is gamma trading. That's the game being played out there. Now, to keep this alive, you got to keep going; you got to keep this kind of thing going. How do you keep this going? You have to continue to add Bitcoin; you have to continue to keep this alive. You have to issue more bonds; you have to issue more equity because the more bondholders you have, the more they're going to short shares on the way up, the more they're going to cover the short on the way down. They will provide some of the volatility as well, and you got to keep the story alive for the shareholders, saying, "Oh, we raised even more money; people can't wait to get in; institutions are throwing money at us."
You will think, "Ah, what a great delta game," and they're there for the gamma game, right? It's like walking down the street and seeing a long lineup and thinking they're going into your bar, but they're not; they're going into the bar next door. That's what's going on here. So this will be up in the applied level tomorrow. I'll show you how gamma trading would work on MicroStrategy shares. [Music]