Oddbean new post about login | logout They are directionally neutral, just shorting to capture the MSTR premium. Doesn’t matter if Bitcoin rips or dumps
Don’t run naked. Especially with scissors. ✂️
Explain what you think the worst case scenario is
That’s why I asked. I don’t know. I’m not a trader.
Oh. I imagine for every dollar of MSTR they short, they are long 2 dollars of bitcoin. The only caveat is the cost and how hard is MSTR to borrow, otherwise it looks like a logical trade
Best risk explanation I’ve seen. FA/FO - BTC doesn’t play nice always. “As the premium widens between #Bitcoin and $MSTR, more shorts will be added because of the "risk-free" arbitrage trade. Most conventional funds will go long on Bitcoin and short on $MSTR. However, these shorts will likely get wrecked repeatedly because the momentum on Bitcoin is quite bullish. Once Bitcoin makes a significant upward move, $MSTR will jump even more. This results in short covering, which, in turn, drives the share price even higher.”
Like I said the caveat is how hard or easy it is to borrow the stock to short. If it is liquid enough, they can adjust the short/long ratio on the fly and capture the premium. That’s how options traders make billions selling options to noobs. 😁
Doesn’t matter to me either way. I don’t gamble. https://image.nostr.build/f7ee21c5b857406d29a169f91412b810a230f7e70103740079c82b68e4401e87.jpg
The worst case scenario is the micro strategy. Premium keeps going up, which allows Michael Saylor to buy more bitcoin, which makes the premium and aum continue to go up.
