Michael Saylor’s flagship most well-liked share, Strike (STRK), was conspicuously absent from his firm’s itemizing announcement this morning.
The corporate as an alternative introduced that traders might now buy calls and places on Strife (STRF), Stretch (STRC), and Stride (STRD), in addition to the sooner choices chain for Technique frequent inventory (MSTR).
No choices chain exists for STRK — regardless of its Collection A seniority and market capitalization exceeding STRD and STRF, respectively.
Strike is exclusive not solely as a result of it was Saylor’s first try at promoting most well-liked shares with perpetual dividends, however as a result of essentially the most bullish sort of most well-liked share that the corporate has ever provided.
No name choices on Technique’s most bullish most well-liked shares
STRK pays a perpetual annualized dividend charge of 8% USD, plus it is going to convert into 0.1 MSTR shares if MSTR rallies to $1,000 per share.
For context, the all-time excessive of MSTR is $543 and it’s at present buying and selling under $330.
This embedded name choice in STRK — i.e. its skill to transform into 0.1 shares of MSTR as soon as MSTR reaches $1,000 — is exclusive among the many firm’s most well-liked share choices.
Neither STRF, STRC, nor STRD provide any conversion function based mostly on the worth of MSTR.
In July of this 12 months, STRK briefly rallied above $129 per share — 29% increased than its $100 liquidation choice on which the corporate pays 8% dividends.
Briefly, traders hoped that its embedded name choice would possibly understand some worth as MSTR rallied north of $457 per share.
Sadly, MSTR has declined 27% from these July heights. Equally, STRK has declined 26% from its July peak.
Regardless of STRK’s notable absence from Technique’s new choices chains, Irresponsibly Lengthy MSTR traders claimed new choices on the opposite three collection of most well-liked shares would in some way add “more capital” to Saylor’s ecosystem.
Choices hardly ever add capital to an ecosystem. They’re derivatives whose worth derives totally from their underlying securities like MSTR.
They provide speculators the flexibility to entry monetary leverage and cost a big bid/ask unfold for that service.
Giant establishments like market-makers and quantitative buying and selling companies earn the overwhelming majority of income from choices buying and selling. Retail traders and fewer refined traders who purchase choices — generally successful, however largely dropping — present a gradual stream of income to those Wall Avenue titans.
In different phrases, fairly than a causative supply of liquidity for frequent inventory, choices largely correlate with liquidity.
As buying and selling volumes enhance and retail traders request choices contracts for higher leverage, establishments grow to be prepared to market-make in these contracts to systematically extract income.
