Ok, I'm completely stumped here.
I hold MSTX, which is basically 2X Leveraged MSTR. I sell covered calls on this position almost every week for really nice gains. This means I offer a contract (option) to sell my shares at a specific price (strike price) , if the price doesn't exceed this strike price I keep the fee (premium) for this contract and my shares. If it goes over this price, I am forced to sell these shares (I get assigned) at that price, but I still keep the premium.
I've been doing this for a long time, last year there was a surprise $14.43 dividend per share on December 31st that no one expecting. This was a massive payout, but it also resulted in the stock dropping in value far more than the dividends.
You can see the massive fall off a the December divs. It has yet to come close to those highs but buying the dip I've done really well with the position even before selling covered calls. My APR on covered calls is 50-100% typically with realized probably around 60% APR. This is due to some weeks having to buy back my covered calls to not be assigned. This is sometimes at a reduced premium but still profitable, and sometimes at a loss.
This week I had a covered call for $38. I didn't think this week would be a big week for MSTX, but I really want to be holding it for next week so I was a little more protective than normal. $38 was a very tight covered call when it was trading at $36 or so. Meaning I had higher than normal risk of being assigned unless the price went down or just didn't move much.
I do weekly covered calls on my assets, and by Tuesday MSTX was already at my strike price and to buy back the contract would been a loss. Later today while the price was over my strike price, I saw an opportunity to buy my covered call and still make around 10% of the premium.
While not ideal, I'll take the win. It's a difference between $1.4K and $13K but didn't put me at risk of having my shares sold at a potentially lower than market price.
I didn't plan on doing cover calls next week, I think it will be a big week for bitcoin and I didn't want to put my shares at risk. Until I looked.
I checked what the premium would be for next week, I didn't plan on selling covered calls but I like to know what my options are (pun intended).
What would normally be $5K-22K in premium, was now $150K.
For some reason the option is adjusted with 100 multiplier. This is usually due to a split or some other major event coming. I've looked everywhere, I can't find a thing that would be related to this. The only thing I could find is two additional MSTR leveraged ETF's being announced. This wouldn't affect MSTX, and not by this amount.
I found this tweet about new MSTR ETFs, one is similar to MSTX but focuses on gains and giving regular dividends. The other being a short on MSTR. These aren't even from the same investment group so I find it hard to believe it is remotely related.
https://x.com/graniteshares/status/1932397312287846613
The funny thing, a $40 covered call (~$2.5 out of they money) is about $12 per contract, but if you go further out, instead of being higher, it's only like $2.
A $40 covered call was giving me 32% of my base investment in premium. This means the price would have to go from about $37.91 to over $50 next Friday for me to lose money over doing nothing. Anything less than that, I still keep the premium. Ideally the price stays below $40 next week, and I keep everything. Anything less than $50 is ideal, but honestly I couldn't care if it went to $60 or even $70. I'll just buy it back on the dip.
One thing I did notice, my covered call is labeled as MSTX1 instead of MSTX. So something is definitely changing. Maybe they are splitting, who knows.
I'm so profitable on this trade, I am fine with getting assigned. In fact, I want to at some point before the end of the year, I'd love to keep this going until then . If they do dividends, I'd rather buy the price drop than get the massive dividend. I don't plan on holding MST* forever anyway.
I really would love to know what is going on though, I am sure something will popup in the next day or so, but so far it's dead quiet about it. My bots usually pick up stuff before most people, but so far I can't find anything.
I did see this the other day which I thought was really interesting. MSTY is basically MSTR with dividends. This shows a lot of retail wants in on MSTR but with regular distributions.
I'm really looking forward to seeing how this plays out.
