Tokyo-based company Metaplanet Inc. recently made a strategic move by selling 223 contracts of bitcoin put options, earning a substantial premium income of 23.972 BTC, equivalent to $1.44 million. These options have a strike price of $62,000 and are set to expire on Dec. 27, 2024.
Unlike other companies like Microstrategy, which have been accumulating bitcoin through debt, Metaplanet decided to take a different approach by utilizing bitcoin options to enhance its coin stash. The transaction was facilitated by Singapore-based QCP Capital, and each contract offered a premium of 0.1075 BTC, generating a nominal yield of 10.75% and an annualized yield of 45.63%.
In order to secure this transaction, Metaplanet posted $13.826 million as margin collateral, which was obtained through the company’s stock acquisition rights exercise. This collateral ensures that Metaplanet can fulfill its obligation to acquire an additional 223 BTC if the option is exercised.
By selling put options, Metaplanet is essentially committing to purchasing bitcoin at the strike price of $62,000, regardless of the market price on the day of expiry. This strategic move allows Metaplanet to increase its bitcoin holdings, which currently amount to 530.717 BTC, valued at $32 million.
If the price of bitcoin falls below $62,000 by Dec. 27, the buyer of the put option is likely to exercise it, leading Metaplanet to acquire 223 bitcoin at the predetermined strike price. However, the premium income earned from selling the options helps offset the potential risk of buying at a higher price than the market value.
On the other hand, if the price of bitcoin surpasses $62,000 by the expiry date, the buyer is less likely to exercise the option, resulting in the expiration of the contract. In this scenario, Metaplanet retains the premium income as profit, further enhancing its financial position.
This strategic selling of put options demonstrates Metaplanet’s innovative approach to growing its bitcoin holdings and maximizing its returns. By leveraging financial instruments like options, the company is able to navigate market volatility and generate additional income, ultimately strengthening its position in the cryptocurrency space.