343PG on Nostr: A thought on a different lens about #MSTR new preference share offering $STRK, which ...
A thought on a different lens about #MSTR new preference share offering $STRK, which at the moment yields about 9% p.a in perpetuity.
As #Saylor has said, this offers a lower risk product out to the market with a more limited upside and downside than MSTR equity. In the earnings call Saylor pointed out that their current Bitcoin holdings could pay for around 750 years worth of #STRK dividends at current prices, and even 100 years worth if BTC declined by 75%. There are still tail events where the ability to make these payments comes under doubt.
The question is, at what point will TradFi investors with no particular positive sentiment on Bitcoin sit up and take notice of this 9% yield? Possibly, at the time when they can hedge out these tail events and still obtain a decent spread over US treasuries.
Could it effectively be done now? Would love to hear thoughts on this. Currently, a 2 year put on MSTR with a strike price at $10 can be bought at 0.66, suggesting a max return of about 14x on the premium.
IBIT is an alternative - a 2 year put on #IBIT (current price around 55) with a strike of 15 (i.e. a drawdown of 70%) is priced at 0.74, which is a max return of 19x.
I'm not sure those offer decent enough protection for someone who wants to use puts to insure against absolute loss of capital on the preference shares, since the premium would have to come out of the annual return and still look compelling for someone looking for an annuity type investment outperforming treasuries at little risk.
Final thought - the upside equity conversion also has value and selling covered calls against that could pay to hedge some of the downside risk in dollar terms.
cc Jeff Booth (nprofile…mwnq) preston (nprofile…5gu2) james (nprofile…t0d8) Lawrence Lepard (nprofile…qztu) would love to hear any thoughts and please do spread this question further on Nostr? #asknostr
PS my point is not that I'd do this personally, but if it starts adding up for someone in Tradfi with zero positive view on Bitcoin this would be a sign of inversion of the current financial world and Saylor may be able to issue a huge amount of these..
As #Saylor has said, this offers a lower risk product out to the market with a more limited upside and downside than MSTR equity. In the earnings call Saylor pointed out that their current Bitcoin holdings could pay for around 750 years worth of #STRK dividends at current prices, and even 100 years worth if BTC declined by 75%. There are still tail events where the ability to make these payments comes under doubt.
The question is, at what point will TradFi investors with no particular positive sentiment on Bitcoin sit up and take notice of this 9% yield? Possibly, at the time when they can hedge out these tail events and still obtain a decent spread over US treasuries.
Could it effectively be done now? Would love to hear thoughts on this. Currently, a 2 year put on MSTR with a strike price at $10 can be bought at 0.66, suggesting a max return of about 14x on the premium.
IBIT is an alternative - a 2 year put on #IBIT (current price around 55) with a strike of 15 (i.e. a drawdown of 70%) is priced at 0.74, which is a max return of 19x.
I'm not sure those offer decent enough protection for someone who wants to use puts to insure against absolute loss of capital on the preference shares, since the premium would have to come out of the annual return and still look compelling for someone looking for an annuity type investment outperforming treasuries at little risk.
Final thought - the upside equity conversion also has value and selling covered calls against that could pay to hedge some of the downside risk in dollar terms.
cc Jeff Booth (nprofile…mwnq) preston (nprofile…5gu2) james (nprofile…t0d8) Lawrence Lepard (nprofile…qztu) would love to hear any thoughts and please do spread this question further on Nostr? #asknostr
PS my point is not that I'd do this personally, but if it starts adding up for someone in Tradfi with zero positive view on Bitcoin this would be a sign of inversion of the current financial world and Saylor may be able to issue a huge amount of these..