Cryptocurrency companies that pivoted to the “Bitcoin treasury” strategy are facing sell-offs after Bitcoin’s price dropped nearly 28% from its all-time high. Strategy Inc., a key player in this strategy, saw a 38% plunge in the last month. Excluded from S&P 500, it faces removal from MSCI index due to its investment fund-type operations.
To take advantage of Strategy’s bearish trend without shorting the stock, consider the bear call spread strategy. This involves buying a call option at a higher strike price than selling another call at a lower strike price. The goal is for the underlying asset to stay below the short strike price at expiration, resulting in a net credit at the start of the trade.
Bear call spreads tend to work best in moderately bearish markets. To find bear call trades on MSTR or any other stock, go to the stock’s profile page, click Vertical Spreads, then the Bear Call tab. Choose an expiration date, typically 30-45 days to expiration, and look for trades with favorable risk/reward ratios and lower loss probabilities.
One example trade involves selling a 220-200-spread bear call on MSTR for $3.55 per share or $355 per contract. With a 5-to-1 risk/reward ratio and a 29% chance of expiring at a loss, this trade expires in 42 days. If MSTR stays below $200 by January 9, 2026, you keep the $355 credit per contract; if it trades above $220, you lose $1,645 per contract.
Selling bear calls offers a different risk exposure compared to shorting a stock or buying long puts. The strategy benefits from time decay, as the option spread loses value each day. This approach does not require a significant downside move to be profitable, making it a more conservative choice compared to direct shorting or buying long puts.
In conclusion, bear call spreads can be a strategic option for investors looking to capitalize on bearish trends in stocks like MSTR. However, options trading carries risks, especially in volatile markets like cryptocurrency-related securities. Conduct thorough research and monitor market developments to make informed decisions.
Read more at Barchart: Bitcoin Slump Hits Strategy Hard, But This MSTR Options Play Pays You