Replying to Avatar π–‹π–Žπ–†π–™π–‰π–Šπ–“π–Žπ–Šπ–— (Β―`◕‿◕´¯)

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
7e
nobody 1y ago

Best risk explanation I’ve seen. FA/FO - BTC doesn’t play nice always.

β€œAs the premium widens between #BitcoinΒ  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.”

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π–‹π–Žπ–†π–™π–‰π–Šπ–“π–Žπ–Šπ–— (Β―`◕‿◕´¯) 1y ago

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. 😁

7e
nobody 1y ago

Doesn’t matter to me either way.

I don’t gamble.