MicroStrategy just added another round of Bitcoin, boosting its Bitcoin holdings to 386,000. And year-to-date, it is up a whopping 478% as of the time of this recording. Now, I also believe that this is one of the most misunderstood stocks. People don't

understand what MicroStrategy is doing, and rightfully so. There are a lot of complicated financial engineering mechanics there, and I'm here to break it all down for you so that you can understand. Don't worry, this is going to be beginner-friendly. Stick around, I

promise you will learn exactly what MicroStrategy is doing. And then, towards the end of the video, I'll give you my plays on MicroStrategy. Let's get right into it. What is MicroStrategy? Real briefly, no, it is not a Bitcoin mining company. MicroStrategy is actually a

remnant from the dot-com bubble. It is an enterprise analytic software. It has nothing to do with Bitcoin, at least originally, and before the whole Bitcoin thing, honestly, it was just hanging around by the skin of its teeth. It was barely making a profit. Some years, it

would even lose. And trust me, this is central to the story of why they are able to do what they are doing with Bitcoin now. They are definitely one of the more divisive companies on the stock market. Why? Because they are now the largest corporate Bitcoin holder, and

essentially, Michael Saylor has hitched his entire wagon on the future of Bitcoin. He is a Bitcoin maximalist, so obviously, people's opinions in government and finance, etc., are split whether Bitcoin is a real thing or whether it is just another tulip mania.

Nonetheless, MicroStrategy's stock price continues to absolutely kill it ever since they started acquiring Bitcoin publicly in August of 2020. As a matter of fact, since August of 2020, their stock price is up 2800%, more than Bitcoin

itself, which is up around 8 to 900% during that same time. So, should you buy shares of MicroStrategy or should you trade MicroStrategy options as opposed to just buying Bitcoin? Well, that all depends. Let's first understand what it is, real quick, that MicroStrategy does. I

promise this will not be boring and will be beginner friendly. So, there are essentially two ways that companies on Wall Street raise money, right? They have access to the capital markets. Remember, MicroStrategy is a company; it is not an ETF. So, the two ways is either by issuing

shares or equity, and two is by issuing debt. These are known as corporate bonds. You might have heard of these. These operate in the same way as government bonds, except they are more risky and usually pay a higher yield. These are the two main ways that companies raise money.

Now, why doesn't a company just go out and issue shares all the time? Because of a term called dilution. You would dilute the shares for your current shareholders if you're just issuing shares out of thin air. That means you're putting more shares into the market, that means you're

diluting the value per share. That means the shareholders that have shares, their share value goes down. So, companies are very careful and specific when they issue shares, but because they're publicly traded, they have to announce it, and usually you see company stock prices tank when they issue more shares and

Corporate debt is exactly what it sounds like: the company says, "Look, we're going to be paying a 5% coupon on our corporate debt if you buy our bonds now." They are riskier than government bonds because government bonds are all but guaranteed, but corporate bonds, if the company goes

out of business, then there goes your money. So MicroStrategy is doing both of these things to do what? To buy Bitcoin. You can see here in one of their press releases, October 30th, it says, "MicroStrategy Announces Third Quarter Financial Results." By the way, they don't

make a ton of money, as we discussed earlier, and announces a $42 billion capital plan. Part of that capital plan is issuing shares. They announce a $21 billion at-the-market equity offering—these are more shares—and then announces a target of raising $21 billion using

fixed income securities (debt). Now, as I said, they've been doing this since August of 2020, and minus this little hitch here in 2022 where everything went down, the price of Bitcoin, as I said, has appreciated about 900% since August of

2020, and we started a full-on bull market in November of 2022, both in stocks, crypto, etc. And if you look at MicroStrategy's performance since August of 2020, here are the returns compared to stocks like Nvidia, compared to Bitcoin itself,

compared to Tesla, Google, Meta—basically the MA7—compared to the S&P, compared to gold, compared to the NASDAQ. This, along with Michael Saylor's very eloquent press interviews, is the reason that MicroStrategy is on everybody's radar right now. So what is the risk here, like

I said it's a remnant of the dotcom bubble. People point to the time that MicroStrategy reached a price per share of $330 thereabouts and tanked all the way down to $40, and now it's back up to $400. So people look at this as one

all-encompassing performance, really ignoring the fact that this performance here has nothing to do with this performance here. But of course, anytime something sees insane swings like this over the years, people are going to be skeptical, and that is why MicroStrategy has insane options premiums because it

is very volatile. And before I get into whether MicroStrategy is investable or tradable or how I'm trading it, I just want to talk about one thing: its recent scheme of 0% corporate bonds. Right, it's offering these corporate bonds at 0%. What does

this mean? That means if you give Michael Saylor's company a million dollars, you're not making any interest, even though it's a bond. However, they are what we call convertible bonds, meaning that at some point in the future, you will be able to convert these bonds for shares

and it seems like he can't issue these fast enough as investors continue to gobble up these 0% convertible notes, which is really a very creative way of doing things. And the only reason I think that other companies are not doing this to the degree that MicroStrategy has is

because MicroStrategy has nothing to lose. Some years it loses money, some years it makes a modest amount. We're not talking about a Microsoft here, right? If Microsoft were to do this, I mean, it would just break the internet. It would break the financial markets. So this is

one of the smartest financial engineering schemes I've ever seen by a public company in a co anyway here's the important part this offering of 0% convertible senior notes are due in 2029 right so there's a lot of time value

here this is part of the reason I'll get to why Micro Strategies trading at such a high premium compared to bitcoin it says here these notes will not bear regular interest and the principal amount of the notes will not accrete the notes will mature on December 1st 2029

unless earlier purchased redeemed or converted in accordance with their terms subject to certain conditions on or after December 4th 2026 Micro Strategy may redeem for cash all or any portion of the notes at a redemption price equal to 100% of the principal amount of the

notes to be redeemed plus accrued and unpaid special interest if any in this case there aren't any so basically these are exactly what they sound like they're not paying any interest and the worst that can happen aside from Micro Strategy going belly up is that the

investors will get their money back they're convertible right who converts them and when the notes will be convertible into cash shares of Micro Strategies Class A common stock or a combination of cash and shares of Micro Strategies Class A common stock at Micro

Strategies election they get to decide not you prior to June 1st 2029 the notes will be converted only upon the occurrence of certain events and during certain periods blah blah blah now here is the conversion rate 1.4872 shares of

MicroStrategy per $1,000 principal amount of notes so that converts to approximately 67.24 per share, $672.4 as of the time of this recording. MicroStrategy is trading at around $400 so this is in 2029, which is 4 years from today, three

and a half years depending on when in 2029 the bond holder is either going to get their cash back or will get shares at 67.24. So that's only about a 67% gain from where we are today. MicroStrategy can gain that in a week, it can also lose

that. So investors see this as a win-win. Either they get their money back or they'll get shares of MicroStrategy at 67.24, and hopefully MicroStrategy is much more than that by then, depending on where Bitcoin is at. MicroStrategy's net asset value premium as of the time

of this recording is 2.45. That means based on the amount of Bitcoin that it holds, right, it holds as of the time of this recording 3.615 billion in Bitcoin. 386,000 made up in their operational activities, like I said they barely make any money

so why is MicroStrategy trading at 2.45 times the amount of Bitcoin that they have on their balance sheet? One is the time value of these leveraged activities, right, so the convertible bonds for instance mature in 2029, so there is a Time Value aspect to this whole thing

right? Two, the demand for MicroStrategy shares is higher than it is for things like Bitcoin ETFs and such, right, because it is a stock, there are a lot of funds, there are a lot of money managers, there are a lot of pension funds etc. that

cannot invest in Bitcoin or Bitcoin ETFs directly, but they can buy shares of companies. So the demand on the stock market might be higher for MicroStrategy than Bitcoin-related things. And it's based on the expectation that MicroStrategy will be able to continue this

money scheme with the issuing shares and the 0% debt in order to buy Bitcoin. And so that expectation carries a premium. Now, what are the risks of investing in MicroStrategy right? The risks are, I think, one is the obvious one is Bitcoin volatility. We know that Bitcoin is prone

to 70-80% drops. Now, that's fine if you hold Bitcoin, but MicroStrategy as a company now has a lot of debt obligations, $7 billion in debt now, total. Right? By the way, not all of their debt are 0% convertible bonds. That is just

the latest round. They do have some debt on their books where they are required to pay interest. You can see here these are all the active debt obligations they have. There's this fantastic article on Seeking Alpha here that highlights what are the potential consequences if Bitcoin does fall, for instance, 80%, which

it's definitely prone to do and can happen, right? 80% would put it at around $20,000 per Bitcoin. But if Bitcoin falls 80%, MicroStrategy currently has $7 billion in net debt. Under the scenario of an 80% drop in Bitcoin, it would be worth

around $7.1 billion. So, in a worst-case scenario, if a debt maturity happens, MicroStrategy will be facing potential bankruptcy if Bitcoin falls by that much, right? It has debt obligations that will now be worth more than the Bitcoin that it holds at the current time. And if we

Look here, you could see that the price of MicroStrategy and the price of Bitcoin, this line in the blue here is called the correlation coefficient, it is so correlated to Bitcoin it's not even funny. There are little times when it does fall out of correlation with

Bitcoin, but for the most part it's almost at a perfect correlation with Bitcoin, which is why during the bear market of 2022 you saw MicroStrategy stock go from $131 all the way down to $13 because it does follow Bitcoin's volatility and does MicroStrategy

always trade at a NAV premium, well most of the time actually, yes, at least as of the current time frame. Now there are times when its NAV premium does fall to one or below that. That has happened before, it has happened when Bitcoin has absolutely tanked, then you see MicroStrategy

actually trade at a discount to Bitcoin. So should you trade or invest in Bitcoin? I think it depends on the type of person you are. If we are in a crypto euphoric cycle, if we are in a Bitcoin crypto bull market, MicroStrategy will trade most of

the time at a NAV premium to Bitcoin. We have the data to show that, and you are much better off if you're just looking at it from a short-term money-making perspective and a speculative perspective. You are much better off trading MicroStrategy than you are

Bitcoin. That much is true, right? And it might be easier for you to get in and out of MicroStrategy too. However, if the price of Bitcoin tanks and MicroStrategy no longer has anybody to buy its debt because remember how fickle Wall Street is, right? If Bitcoin's price

goes from 990,000 to 19,000 you're going to hear all of these narratives on Wall Street saying this was always a tulip mania Bitcoin is BS this is speculative this isn't gold this is just funny money this is something for teenagers and drug

traffickers etc right you're going to hear those narratives and investing public on Wall Street are going to be so turned off by the idea of giving this company money to buy Bitcoin that they will at some point they will face the point in which they don't have any more

investors Bitcoin has to tank for that to happen so in my opinion in owning Bitcoin and investing in micro strategy is not the same thing I personally believe in the idea of Bitcoin if you look at the price of houses in Bitcoin if you look at the US dollar in Bitcoin if you

look at the price of gold in Bitcoin right Bitcoin retains its value even though it's volatile but it has retained its value over all of those things much much better you can disagree with me and that's perfectly fine I don't want to engage in a debate on crypto or on

bitcoin if you do believe in Bitcoin you are much better off buying Bitcoin if all you want to do is make quick money in a bull market micro strategy will appreciate at a premium to bitcoin and especially if you're using something like options so there are two ways that

I would trade micro strategy right as as I showed you before when we are in a bear market micro strategy actually trades at a discount to bitcoin that at least in the short time that they've been buying Bitcoin in the last four to 5 years looks like an asymmetrical

opportunity if you can hold it for four to five years right if you can hold MicroStrategy during the Bitcoin bear markets you are likely to make a ton of money when Bitcoin is back in a bull market right that's number one number two because of MicroStrategy's volatility

tied to Bitcoin's volatility MicroStrategy premiums on selling options are so good it's unreal obviously this still comes at a risk but you can see here today I sold the 200 put expiring December 20th 2024 and I'm already up

21.5% on it I sold the 200 put for $510 that is insane because right now MicroStrategy is trading at 403 so I sold the 200 put which if MicroStrategy's price were to drop that would signify a 50% drop from here and I'm

getting $510 per contract that is absolutely insane and by the way for the record if MicroStrategy fell to 200 depending on where we are in the bull market if we're in a bear market it's a different story but if we're still in

the bull market I'm buying MicroStrategy so I'm okay getting assigned these at least for the time being right but the premiums are so crazy that in my opinion you are much better off selling options than you are buying options unless you buy something like a vertical

spread so in my opinion selling options selling cash secured puts this by the way was like a 0.005 Delta which is wild but selling puts on MicroStrategy especially on down days like this it had a 16% day on November 21st and then a

6% day followed by a NE 4% day on November 25th as of the time of this recording so on red days you're going to get more premium but doing that I think to me is easy money and then if you end

up getting assigned obviously you can run the wheel but that in my opinion is the way to play MicroStrategy now obviously if you have a penchant for risk you can buy naked calls but your technical analysis better be on point not only with MicroStrategy but with

Bitcoin as well right when we look at Bitcoin you better have your technical analysis on point in this case you know you could say something like we definitely have a not saying Bitcoin will do this but just as an example you have a resistance level here right in

the $70,000 range so if Bitcoin broke out and is retesting that $70,000 range yes you can buy calls on MicroStrategy if your risk tolerance allows for it if you know how to exit those calls if MicroStrategy breaks market structure

to the downside for instance etc but those are the ways that I would play MicroStrategy I myself do not believe in investing in MicroStrategy those of you that are familiar with this channel know that I'm heavily invested in Bitcoin and have been since 2017 my first buy-in

Bitcoin was $900 obviously you know subsequent buys have been higher since then but I just don't believe in MicroStrategy's ability to raise cheap money forever I feel like there will be an expiry on that scheme and the expiry will likely come the next time that

Bitcoin has a 50-60-70% drop and Wall Street freaks out. They are not going to loan this company any more money, and then now they have to pay back their debt obligations with the heavily discounted Bitcoin that they have on the

books, right? And by the way, this is not an indictment on Michael Saylor. I think he's brilliant. I think what he's doing is extremely creative, and I've never seen anything like it in my 20 years in finance, right? And nobody else has

seen anything like it. So it's not an indictment on him. It's just, am I going to invest in this company for the long term through all of the ups and downs and the NAV decay and all that? Probably not. I will likely continue to just

invest in Bitcoin and trade MicroStrategy anyway. I hope you guys found this video helpful. If you did, leave it a big fat thumbs up. Let me know in the comment section below: Are you invested in MicroStrategy? Do you trade it? How do you trade it? What is your price target?

Would love to know. Do you not believe in it? Do you think that it's a Ponzi scheme, as I've heard some people call it? I want to hear all of your thoughts, guys. Anyway, if you want to join all of our trades, click on the link in the description. It

is close to Black Friday as at the time of this recording. You should see a Black Friday deal. Click on the link in the description. Trade live with me every single morning. Stay safe out there, traders. Peace.

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