Here’s your trade on Microstrategy ($MSTR) and Bitcoin ($BTC) – December 4, 2024
Dan Fitzpatrick here at StockMarketMentor.com. I want to look at some stocks here, but first, let’s look at Bitcoin ( BTC ).
This is knocking at the door here at 100,000.00. I really like the way this is trading because it gives us a clear line here. The bottom line on this is, it’s forming this little pennant pattern. Scott has been all over this at Crypto Market Mentor, in a big way. Every so often you get this kind of consolidation like this that ultimately runs higher.
After the kind of base that has had for most of the year, I think this stock is ready to roll. Once it does break above 100 I think things will get really sporty about this. That’s all I’ll say about this. Things should get really, really interesting. If you’re saying, I don’t have a crypto account, first of all, get one.
Get a crypto account, it’s really not that big of a deal. Just go over to Coinbase ( NASDAQ: COIN ) or do Tastytrade, where you can sell crypto on their stuff too, but do something here. We’re talking about making money, and frankly, crypto has been the asset class of the year, actually, Bitcoin ( BTC ) has been the asset class of the year. Look where it started at the beginning of the year, let’s just say that it’s gone up a lot.
Another way you can trade this though, is to trade MicroStrategy ( NASDAQ: MSTR ), which had a big monster move. And then Andrew Left and a couple of other people right up at the top here, they said, Do you know what? We can’t justify this. We love Bitcoin ( BTC ), and we own Bitcoin ( BTC ).
But MicroStrategy ( NASDAQ: MSTR ), even based on the amount of Bitcoin ( BTC ) it owns, the net asset value of MicroStrategy ( NASDAQ: MSTR ) is way too high, it’s really, really expensive. Again, based on the value of the coins that MicroStrategy ( NASDAQ: MSTR ) has, the stock really got crushed here.
The thing is, that’s only going to be that way for so long because Saylor just keeps buying more and more Bitcoin ( BTC ). I think he’s bought more since then, he sells convertible bonds, uses the money, and buys Bitcoin ( BTC ). Anyway, it looks to me like this thing, with all the extra Bitcoin ( BTC ) buying, at some point the market is going to say, Okay, that was then, this is now, much lower, many more Bitcoins, so it’s time to buy this stock again. I feel like we’re seeing that right now.
If you look at MSTX ( NASDAQ: MSTX ), this is the ‘double your fun’ for MicroStrategy ( NASDAQ: MSTR ). This is working out really, really well right here. So you could look at this and say, Okay, I’m buying this stock and I’ll keep a stop right here. Or I’m buying the stock and I’ll keep a stop down here. But one way or another, you need to have your risk defined in some way, but you can buy this here.
I bought some, I’ve been holding some for a while, and then I bought a little bit more today, my stop is right down here. I was just saying, with options, this has weekly options, however, the bid and the ask spread on each of the strikes is so obscenely wide. It’s like let’s say, Oh, I think the stock’s going higher. So you buy call options. It’s like immediately you’re down 12 percent because as soon as you own something, then the market value is whatever it’s bid at.
And so the point is, for you to be trading options on this, either standard contract or weekly options, it’s a real problematic thing for you because they’re just not that liquid. And you can look at some of those, and there’s, literally, no open interest in them. And then on an even number like on the $100.00 calls or the $110.00 calls or $120.00 calls. It’s like nine contracts have traded today, something stupid like that.
So my advice to my people on the other call was, that if you are going to be trading options on this type of a stock, make sure that you’re ready to ride it into the ground. In other words, if you sell the $110.00 call, first of all, you should the stock so it’s a covered call. If you sell the 110.00, you’ve got to just say, Okay, I’m going to get called out of this stock if it runs above 110.00. Or okay, if it stays below 110.00 I’m just going to let it expire worthless, I’m not going to buy it back even if it’s a good profit.
The same thing on the downside, Oh, I’ve sold the put, I sold the $100.00 put or the $90.00 put. Uh-oh, the stock starts moving down. I’m afraid that I’m going to get put that stock. Okay, you should have thought of that before you sold the put. Because certainly on a stock like this, if you’re going to sell a put at a particular strike.
Let’s say you sell the $100.00 put, you have to be willing to take the stock at $100.00. If you’re not willing to do that, there’s no shame in that, but just don’t sell those puts. Because what you’re going to find is, if you say, Well shoot man, I can’t take this stock. I just thought I’d get the put and it would expire worthless.
Everybody’s looking at the same chart. And so you’ve sold the put, it’s running against you and now have to buy it back. Well, it’s not like you’re going to catch somebody sleeping, the offer on those puts that you’re trying to buy back is going to be through the roof. And so you’re not going to be able to get out of that trade without a lot of pain.
Again, what you have to do if you’re selling options on a massively volatile stock like MicroStrategy ( NASDAQ: MSTR ), double your fun. What you have to do is say, live by the sword, die by the sword, and we’ll see what happens.
With that said, I’ve got some MSTX ( NASDAQ: MSTX ) here. I don’t have any options against it one way or another. What I will probably do tomorrow is, I’ll probably sell some out of the money expiring Friday, 120.00 or 125.00, whatever it is, I will sell some way out of the money calls that have a Delta, we’ll say like 20. Meaning there is a 20 percent chance that they expire in the money. If I can get a buck or two or three for them, I’ll take it. That’s how I’m trading this.
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