Strategy Stock Has Underperformed Bitcoin. How To Profit From Potentially Further Weakness.

Core Viewpoint - Strategy, formerly known as MicroStrategy, has transitioned into a leveraged bet on bitcoin, primarily accumulating bitcoin through debt and equity offerings, despite facing disappointing stock performance [1][2]. Company Strategy - The company's strategy is centered on promoting bitcoin as "digital gold," with co-founder Michael Saylor advocating for this approach as a unique investment opportunity [2]. - Strategy's primary function has shifted from software to acting as a bitcoin treasury vehicle, which has led to significant changes in its market positioning [1]. Market Performance - Despite bitcoin reaching an all-time high of over $124,000 on August 14, 2024, Strategy's stock has underperformed, trading around 325, significantly below its late-November 2024 high of 543 [2]. - The disconnect between Strategy's stock performance and bitcoin's price is attributed to the rise of alternative bitcoin investment products, such as spot bitcoin ETFs, which provide investors with other avenues for exposure [3]. Valuation Metrics - The premium to net asset value (NAV) of Strategy's bitcoin holdings has drastically decreased from over 300% to just above 40%, indicating a loss of unique appeal in the market [4]. - The stock has continued to underperform bitcoin, with a decline of 11% over the past month compared to a 2% decline in the iShares Bitcoin ETF [6]. Options Trading Strategy - Investors are considering put options as a way to capitalize on further weakness in Strategy's stock, with a specific put option priced at around $17 per contract [4][5]. - The implied volatility for Strategy's October options is 51%, which is lower than the historical annualized volatility of around 80%, suggesting a potential for risk management through options trading [6].