MicroStrategy (MSTR) is witnessing an extraordinary increase in volatility, now 2.5 times higher than Bitcoin’s, presenting options traders with significant opportunities—and risks.
As the world’s largest publicly traded Bitcoin holder, MicroStrategy owns over 380,000 BTC. The company’s stock has surged by 500% this year, driven by investors seeking indirect exposure to Bitcoin. In comparison, Bitcoin itself has risen by 124% this year, according to data from CoinDesk and TradingView.
This rise in stock price is accompanied by a sharp increase in implied volatility (IV). As of Monday, MSTR’s 30-day IV stood at an annualized 140.86%, according to OptionCharts.com. This is more than two and a half times the 30-day IV for Bitcoin, which is currently 55.65%, according to Deribit’s DVOL index. The heightened volatility suggests that investors expect greater price fluctuations in MicroStrategy shares than in Bitcoin itself.
For options traders, a rise in implied volatility means higher premiums for options contracts, which gives traders the opportunity to generate more income. As volatility increases, the price of options (both call and put) rises, meaning traders can sell these options at higher prices to earn more premiums.
One popular strategy for traders holding the underlying asset is the covered call. In this strategy, traders sell call options on their MSTR shares at strike prices significantly higher than the current market price, earning premiums while still holding the underlying stock. If the price of MSTR rises, the gains from holding the stock typically outweigh any losses from the calls they sold.
Given that MSTR’s implied volatility is 2.5 times higher than Bitcoin’s, using MSTR for a covered call strategy could yield significantly higher returns than using Bitcoin options. This has led to growing interest in trading MSTR options, with many traders looking to capitalize on the company’s higher volatility.
However, it’s important to keep in mind that a covered call strategy also has its downsides. While it provides extra income, it also limits the upside potential of the position. If MSTR experiences a major rally, traders could miss out on significant profits since the call options they sold cap their potential gains, making it more profitable in some cases to simply hold the stock instead of using options strategies.
