MicroStrategy (MSTR): How to Make $7,000 While You Wait

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In the world of trading, patience can be just as profitable as action. This week, MicroStrategy (MSTR) is experiencing a lull, waiting for Bitcoin’s next move. But even in a quiet market, there’s an opportunity to generate significant income. In this blog, we’ll explore how I made $7,000 in a week by strategically selling covered calls on MicroStrategy stock.

Understanding the Trade Setup

Market Context: Why MicroStrategy is Quiet

MicroStrategy is heavily influenced by Bitcoin’s price movements, as the company holds substantial Bitcoin reserves. Currently, the stock is relatively quiet, trading around $326.80, as investors wait for Bitcoin’s next breakout. Despite this stagnation, the covered call strategy remains effective for generating weekly income.

My Position Going Into the Week

I held the 175 calls on 900 shares (9 contracts) of MicroStrategy stock. To generate income, I sold covered calls against this position. Last week, I sold the 340 calls and collected $668 per contract, totaling about $6,500. With expiration approaching, the value of these calls decreased to $14.50 per contract, enabling me to buy them back at a lower price.

Rolling Covered Calls: The Strategy Explained

Why Roll the Covered Calls?

Instead of letting the options expire and risking potential stock movement over the weekend, I opted to roll the covered calls. This strategy allows me to:

Lock in profits from the previous sale.
Avoid weekend volatility.
Generate additional income by selling new calls for the next expiration date.

Selecting the Next Strike Price

I chose to roll the calls to the 335 strike price for next week, which was about $10 out of the money. This decision was based on:

Collecting $7.50 per share ($750 per contract) in extrinsic value, also known as ‘the juice.’
Providing downside protection while allowing for potential upside gains if the stock moves higher.

Executing the Trade

Using ThinkorSwim, I created a rolling order:

Bought back 9 contracts of the expiring 340 calls.
Sold 9 contracts of the 335 calls expiring next week.
Collected $767 per contract, totaling $6,900 in income for the week.

Why This Strategy Works: Key Takeaways

Consistent Income Generation

Even in a stagnant market, selling covered calls provides reliable income. By strategically selecting out-of-the-money strike prices, you can maximize premium collection while minimizing risk.

Flexibility with Rolling

Rolling the calls gives flexibility in managing positions without closing out the base stock. This maintains exposure to potential upside while continuously collecting premium income.

Risk Management & Downside Protection

By selling out-of-the-money calls, I not only generated income but also protected the position against minor downside movements.

Life Improving Tips

Patience Pays Off: In trading and in life, sometimes waiting is more profitable than acting impulsively.
Strategic Planning: Have a plan for every scenario. Know when to roll, when to hold, and when to exit.
Financial Discipline: Always track your income and expenses, just as you would with covered call premiums and buybacks.

FAQs

Q: Why not let the calls expire? A: Letting calls expire risks weekend volatility. Rolling the position locks in profits and allows for continued income generation.

Q: What if the stock moves above the strike price? A: If the stock goes above the strike price, you can roll up to a higher strike or let the stock get called away, locking in gains from the base position.

Q: Is this strategy risky? A: Covered calls are generally lower-risk compared to other options strategies because you own the underlying stock. However, they limit upside potential if the stock rallies significantly.

Call to Action

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Conclusion: Maximizing Income While You Wait

This week’s MicroStrategy trade is a great example of making money in a stagnant market. By strategically selling and rolling covered calls, I generated $6,900 in income while maintaining flexibility for future stock movements. The key takeaway is that even in a quiet market, you can make consistent income with the right strategy.

MicroStrategy (MSTR): How to Make $7,000 While You Wait

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