Oddbean

My brain is warped right now. If I understand these Quant Bros correctly, Michael Saylor has created a "who wants to be a millionaire" lottery on Bitcoin. If I'm a Bitcoiner who believes it's going much higher, I could buy a long dated MSTR call option for January 2027 for MSTR at 700$ for 10,000 $ If you are not a Bitcoin believer, but think that you would like some Microstrategy stock just in case: You can buy 100 shares of Microstrategy for 30,000 bucks and then turn around and sell the right to buy them to someone else at double it's current price in January 2027 for 10,000 bucks... You just got 30% off your initial Microstrategy investment plus you would have the right to enjoy a double of the stock investment! I think gambling is a bad idea and I am not personally doing this. But what am I missing? 30% discount for a 30,000 stock purchase? https://www.youtube.com/live/VW0kFXkNKPg

am i crazy? or is this right? if someone doesn't believe in bitcoin but they want some exposure, they could this: 1. buy $33,000 of 100 MSTR today 2. sell $12,000 760 call option for Jan 2027 when January 2027 comes they get a payout of $76,000 if bitcoiners are right. for investing only $21,000 in today's dollars!! THey in turn are selling selling millionaire maker tickets to the people buying them who believe in much higher price target for MSTR. let's say crazy town happens and MSTR is $10,000 in 2027. for the price of $12,000 today, someone will get ($10,000-700) *100 = $930,000 in 2027.

If someone doesn't believe in Bitcoin then it would be a stupid trade. They spend $33k on a stock, and they recoup $12k by selling an option. If they are right and MSTR goes bust they may end up with $21k loss. It's just an upside trade where you hedge downside risk by limiting upside profit potential

That's a great point. It's all about perspective. I'm still wrapping my head around the fact that someone is paying 1/3 of todays value of the share to buy the share in the future. Rough estimate is that max leverage with this approach would be limited to (100 *share price today)/premium. Or around 2.5X leverage. I wonder at what point this could be considered "seriously degen". Right now the mood is "give me 2.5x or bust". And all these poker games drive up the demand for the poker chips.