The cryptocurrency market is currently experiencing a wild ride, reminiscent of a roller coaster with added loops for an extra thrill. With Bitcoin (BTC) inching closer to the $100,000 mark, traders are turning to options tied to a leveraged 2x long exchange-traded fund (ETF) linked to MicroStrategy’s share price to maximize their gains.
The Defiance Daily Target 2X Long MSTR ETF, traded as MSTX on Nasdaq, aims to provide investors with two times or 200% of the daily performance of MSTR’s share price. On Tuesday, the ETF surged by 20%, briefly surpassing $180 as MSTR itself saw a 10% increase to $473.
This surge in the ETF’s value has led to a significant increase in trading volumes for options tied to MSTX. Market participants are particularly interested in deep out-of-the-money (OTM) call options with a higher strike price of $230. These deep OTM calls are more affordable compared to options closer to the market rate of the underlying asset, offering a potentially lucrative payout.
The demand for the $230 strike call options spans across various expiration dates, including contracts set to expire on June 20, 2025. Call options provide the buyer with the right, but not the obligation, to purchase the underlying asset at a predetermined price on or before a specific date. By purchasing call options, investors can control a large position in the underlying asset while paying only a small premium upfront, thereby magnifying potential profits.
The overwhelmingly bullish sentiment surrounding MSTX options mirrors the market for MSTR options, where calls are currently trading at a premium compared to puts, which are typically used as protection against price declines. This bullish trend is also evident in the options market for BlackRock’s spot bitcoin ETF, as well as on platforms like CME and Deribit, indicating a surge in retail investor enthusiasm and speculative activity that often precedes market corrections.
This heightened activity comes amidst expectations of a more favorable regulatory environment under the upcoming administration and potential interest rate cuts by the Federal Reserve, both of which are driving Bitcoin’s upward trajectory. The leading cryptocurrency recently reached new all-time highs above $97,000, marking a 38% gain for the month, according to CoinDesk data.
MicroStrategy remains the largest publicly listed holder of Bitcoin, amassing a significant stash of 331,200 coins worth $3.04 billion since 2020. The company’s bullish stance on Bitcoin has contributed to its own stock price surge, further fueling the optimism in the cryptocurrency market.
As Bitcoin continues its upward momentum towards the six-digit price target, traders are eagerly watching the market dynamics, looking for opportunities to capitalize on the volatile yet lucrative cryptocurrency landscape.
