Transcription
hello everybody Welcome to bitcoin.
crypto my name is Forest Stevens in
today's episode I'm going to be talking
about whether it suits you better to own
shares of micro strategy call options or
the other derivative options mstu mstx
and MST y but before I get into that if
you believe in micro strategy you should
believe in Bitcoin and the real benefit
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of them is that you can own it yourself
you can actually hold and be a bearer of
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everybody for that now let's get into
this so shares of micro strategy um in
my opinion
are the safer of all of these different
options that we're going to be talking
about um obviously it's an extremely
volatile stock maybe it doesn't even fit
in your portfolio because of that
volatility however we have seen if we
look into the history history of micro
strategy that that volatility is skewed
to the
upside so that means that historically
it's done really well now with that
there's these huge draw Downs as well
there happens uh every once in a while a
big down day of micro strategy now what
can happen when you when you Veer out of
shares is those down days in the in
micro strategy uh can affect you a lot
lot more so mstx and mstu they are
basically the same thing uh I'm not sure
exactly how they're built but they
expose you to two times leverage of
micro strategy and they're an ETF and
they would do this through derivatives
of some sort which means options they
would hold options or swaps or
agreements and they uh would basically
expose you to that two times of micro
strategies volatility price action and
this is a daily rebalancing type uh ETF
so at the end of the day or or it just
it tries to track micro strategies
movements within the day and then it
rebalances every single day so they're
quite um extensive on on the fabrication
of them and therefore they're also
expensive so they have uh an expense
ratio to them which is something to
consider whether that's something you
want to pay pay for that two times
leverage exposure the other thing too is
with these leveraged funds this goes for
any leveraged fund if you make a 10%
gain and then you have a 10% loss that
10% loss after the 10% gain is actually
more than the 10% upside because it
includes
the it starts at that higher price so
10% up 10% down they're not equal and
therefore
uh with these leveraged funds you get
more downside with them uh
and that sort of begins to Decay and
give you over a long period of
time uh less percentage basically uh
upside than the 2% that it's aiming for
and therefore it's uh a lot of people
advise not to hold these longterm and
that these are are basically daily
trading instruments so if you believe
there's some sort of catalyst uh and you
want to trade it and you want to be
leveraged to that trade then this would
be something that you could do in a
short term and basically uh the longer
you hold it the more exposure to
downside that you have and uh I mean it
it would still do long uh still do good
long term if the price continues to go
up and even still has those draw Downs
but you're um exposing yourself to more
of the uh the basically the negativity
of those draw Downs for your percentage
gains so the other option here is uh
before we get into options is MST Y
which is a covered call strategy so what
that means is they hold spot they hold
the shares of micro strategy and they
sell call options and a call option is a
contract that allows
uh the person that buys the contract to
um based on certain criteria uh gain
ownership of those shares and because of
that they're paying a premium or they're
paying a price for that contract itself
now these call options they are out of
the money which means that they are
going to be at a strike price um
actually I'm not entirely sure where MST
sells their call options some of these
funds do it at the money and they just
expose you to more premium because the
way that options are designed and I'll
get into this on the options side as
well I might reiterate it again the
value of an option is based on a few
things but one of them is the underlying
share uh price the underlying share
volatility and the distance uh of uh how
close the option is to expiring in the
money um so further out of the money
that option becomes cheaper closer to
the money or in the money even that that
option becomes more expensive because
it's more likely that it'll expire in
the money when it expires that's the
other thing that really dictates the
price of an option is how far away the
date of expiry is so the further away
the expiry date is the more valuable the
option as well so if MST is doing a
strategy of maybe 10% out of the money
um say Microsoft or micro strategy or
the the underlying stock is trading at
$100 then they have a strike price or uh
an option expiry um amount at
$110 that's 10% out and say they do it
for a month out um so in a month after
uh issuing that option that option
expires now they get paid right away and
if that underlying uh Equity does not go
to
$110 then it's not in the interest of
the option holder to exercise that so
those shares do not get taken away and
in fact that option expires worthless so
the option seller the covered call
seller gets to keep their shares and
they get to keep that premium that they
got right away when they sold sold that
option so that's how uh selling covered
calls Works in its bare minimum I'm not
exactly sure the strategy that MST does
a lot of people uh sell covered calls in
fact I've sold covered calls just myself
I've owned covered call strategy uh ETFs
and you pay a little bit of the expense
ratio and you give the um power over to
whatever their strategy is sometimes
they're flexible strategy and they kind
of look at the markets and and dictate
uh what is best for either acquiring
premium or not getting shares assigned
uh making those those options expire
worthless um sometimes they're just very
strategy uh oriented and they they tell
you very upfront I'm not sure with MSD y
that might be something to look into if
that is a uh strategy that's interesting
for you now historically they've been
able to pay I think
136% um through these option premiums
which is really crazy um however
msty even including that
136% uh that they pay out through
dividends monthly has still
underperformed just owning micro
strategy stock not even leverag just
their stock because of the crazy price
appreciation that they have so msty it
basically capture upside because they're
selling that option and sometimes
they're going to expire in the money and
they pay you kind of that monthly income
generating thing so it's it's more for a
holder that wants to generate some
income right away wants to do it
passively doesn't want to sell C calls
themselves on the underlying and is okay
with not making a total return that is
as high as the underlying stock uh there
are some covered call strategies that
could actually outperform holding um
holding the underlying I've personally
done that just by being very smart and
very uh safe about selling these options
way out of the money and and kind of
doing it in a very strategic way however
that is fairly difficult and the rewards
you get are going to be much smaller
like the percentage that you're able to
use as income from selling options it's
going to be a lot less than if you're
just allowing these to get uh called in
the in the money and your um you're
underperforming the total uh return that
you would get from holding the underline
so there's a few different options of
what you um what you could hold to get
exposure to micro strategy underlying uh
leveraged ETF and a covered call ETF
that is geared towards income the other
thing you could do is you could this is
all for longing right um you could buy
options you could buy call options now
I've explained call options with MST but
if you were to instead of sell covered
calls or or be exposed to uh a fund that
sells covered calls if you wanted to be
the buyer of covered calls why would you
want to do that so the reason you would
want to do that is because you want
leveraged exposure to micro strategies
share price uh increasing and their
volatility increasing and you believe
you have uh a strategy that would
perform well in a certain given amount
of time that's the other thing when you
buy options is you have to you have to
buy options with an expiry date and you
have
to think that the price is going to
appreciate enough that you can either
exercise that uh call option in the
money or you could sell that call option
within the period of you owning it and
before it expires at a
profit now with options because of that
EXP date there's something called Theta
Decay and you could learn all about the
Greeks uh gamma uh Delta Theta um and
others however Theta um is just to to
Simply sum it up uh is basically every
single day uh because you get closer to
that expiry there's a certain amount of
Decay to the value of that option um if
your if your option is really really
long dated that decay is really minimal
but the closer it gets to expiry that
decay speeds up because um you're just
you're you're much more limited to um
the volatility and the upside that you
need to either become in the money or to
increase the value of that option
because it is going to expire really
quickly so long dated options act a lot
more like the share price and um in in
that way are safer than short-dated
options um but you know options um they
people also use them as a hedging
instrument but I'm I'm basically talking
about the way of using them as an
amplifier for a BET right you you are
betting that the price will appreciate
within a given certain amount of time
and you can also bet depending on the
strike price of how high you think that
value is going to go now to make money
from options you don't actually ever
have to get in the money right like you
could buy for instance I own an option
on micro strategy for the 530 call and
this was the furthest out of the money
that I could buy for these exp these uh
date of expiry of these options and now
it's 990 I believe so that just goes to
show how much micro strategy has
appreciated app ated and how much um the
market makers are pushing out the long
side the the outof the- money side of
these call options because they keep
coming into the money um and all the
ones basically before 5:30 or well not
quite all of them but a lot of them have
become in the money so they're they're
pushing out the the date of these um
options and so I had a bet basically
that uh and okay so even still right
this option that I hold is not in the
money but because it's a leap it
expires July 2026 I
believe because there's still so much
time there's like 500 days or something
like that um maybe it's 27 actually I I
can't remember there's there's about 500
somewhat days until this option expires
so there's a long period of time that
the price could go up and it could get
in the money so there's a lot of value
because of the amount of time that can
still happen uh and there's still so
much that can happen to micros micro
strategies underlying stock and because
it has gotten so much closer to being in
the money and worth something uh to a
holder who wants to exercise it that it
is gone up in value um drastically
compared to the shares of micro strategy
that I hold the shares of micro strategy
that I hold
[Music]
are uh 60% up uh the option that I'm
telling you about is up
350% so these gains are elevated and
that's the leverage that comes in
because an option I should have
explained this much earlier but an
option one option contract is um
basically connected to 100 shares so an
option might be a dollar right but
that's a dollar per share and you need
to times that by 100 so if you're buying
a dollar option you're actually going to
have to pay
$100 because you're buying uh per share
and each contract is for a 100 shares so
that's uh something to consider now
these options on micro strategy they're
expensive and that's because of the
underlying share prices volatility and
that is what creates a lot of the value
of these options because there's a a lot
of chance there's a lot of opportunity
with that volatility for these options
to become in the money
so I really think and of course this is
not Financial advice I'm just kind of
explaining how any of these things work
um as best I can in my own words but I
think that for the vast majority of
people that want to play micro strategy
Shares are going to be your safest bet
because they you're not um subjected
to Theta Decay um and they're not as
complicated you don't have to understand
okay well what is the strike price that
I think it could get to uh or what am I
willing to sell at what percentage gain
am I willing to sell at when will these
uh when will The Leverage sort of start
to wear off because as it becomes more
in the money it starts acting more like
shares as well uh so do I need to roll
it for another out ofthe money call um
this is something that a lot of people
in uh micro strategy
um irresponsibly long are doing is they
they buy the furthest out of the money
then they those things get closer to in
the money and they roll them and buy
even further out of the money ones that
were just created so there's there's a
lot more you have to know to trade
options there's a lot more risk and
especially there's a lot of risk when
you don't know what you're doing and
from watching this video you have no
idea what you're doing if any of this is
new to you do not buy options and of
course this is not Financial advice but
um this is just something that you have
to consider this is something you have
to think about and learn about before um
before it makes sense you could of
course just buy something randomly buy
something with the limited knowledge you
have and get totally lucky and we are in
a bull market micro strategy is
perfecting and implementing their
strategy of buying more Bitcoin per
share which and they're you know growing
just rapidly at that metric the mnav
argument makes no sense there are people
shorting I mean the last video I made
there's somebody shorting micro strategy
off of the mnav idea and because of the
price of micro strategy in the early
2000s Doom bubble and how it collapsed
from there which is just hilarious it's
hilarious to uh to compare micro
strategy today to micr strategy in the
Doom bubble it's hilarious how
fundamentally different the world is how
fundamentally different micro strategy
is and to compare those is just again
hilarious so
um know what you're doing maybe these
other ETFs uh that expose you to micro
strategy in some way are the way to go
for you maybe the shares maybe nun maybe
Bitcoin right uh that's personally what
I do like I have Micro strategy and it's
become a large part of my portfolio but
when I bought into it it was a smaller
percentage than it is now and it was
always meant to be smaller than my cold
storage Bitcoin which is to me the best
performing asset um not just you know
not because of the gains the percentage
gains but because of the technology of
what Bitcoin is and the future potential
of what Bitcoin is remember micro straty
strategy is not an in kind product where
that Bitcoin per share you are not
you're not owed that you will never be
allocated that this is a Fiat play and
maybe people can play it in a way of
outperforming Bitcoin and then rolling
that into Bitcoin but the the thing that
happens when you start making money is
you start to become more and more risky
you start to think it's more and more of
a sure thing so timing getting out of
the market doing a trade how long can
micro strategy do this there are risks
there are risks to bitcoin and bit the
risks to bitcoin um to the price of
Bitcoin not Bitcoin itself uh affect
micro strategy how will they affect
micro strategy will they amplify just as
the gains of micro of Bitcoin amplify
the gains of bit of micro strategy
getting these mixed up uh or will micro
strategy uh outperform Bitcoin in a in a
bare Market because of the strategy they
performing these things are are um yet
to be seen and so it's just good to know
about all of this stuff it's good to
think about this kind of stuff and it's
good to learn especially if you're going
to act so that is what I'm trying to do
here is just teach you a little bit
about options um not only just calls and
puts but the different options you have
to get exposure to mic strategy so if
anything here has been unclear I
appreciate a comment that would question
uh give me a question to answer I can
answer that in the comment section
itself or in another video um also I
have a Discord that is open that you can
join and you can actually book a
one-on-one free 15minute call with me if
you have any personal questions about
micr strategy Bitcoin Bitcoin well
whatever have you and there's a whole uh
group on there that's you know forming
um people have asked about uh multi- uh
all micro strategy all these different
things there's answers in these
different channels that I've built on on
this Discord and it's uh forming
community so go ahead and join that and
check out Bitcoin well and any other
sponsors that I get in the future I will
put in the description as well so thanks
everybody for watching and we'll see you
on the next video