The crypto market right now is like a roller coaster that races forward and then adds a few extra loops for good measure, taking the excitement and risk to new heights.
With bitcoin {{BTC}} heading towards the $100,000 mark, traders are using options tied to an already leveraged 2x long exchange-traded fund (ETF) tied to the stock price of bitcoin holder MicroStrategy to maximize profits enlarge.
The Defiance Daily Target 2X Long MSTR ETF, trading under the ticker MSTX on Nasdaq, seeks to deliver twice or 200% of the daily performance of MSTR’s share price. The ETF rose 20% to briefly reach $180 on Tuesday, while MSTR rose 10% to $473.
Meanwhile, trading volumes in options linked to the ETF have soared, with market participants piling into the deep out-of-the-money (OTM) higher strike call option at $230, according to data from analytics platform ConvexValue. Deep OTM calls are cheaper than calls close to the prevailing market rate of the underlying asset, and offer asymmetric payout potential.
Demand for the $230 strike call was spread across multiple expirations, including contracts set to settle on June 20, 2025. A call option gives the buyer the right but not the obligation to purchase the underlying asset at a predetermined price on or before a specific date. . The option allows the buyer to control a large position in the underlying asset while paying a small premium up front, increasing the potential profit.
The extremely bullish sentiment is consistent with the MSTR options market, where call options recently traded at a record premium over put options commonly used to protect against price declines, according to data source Market Chameleon. Similar highly bullish flows have crossed the line on the CME, Deribit and the emerging options linked to BlackRock’s spot bitcoin ETF, signaling retail investor mania and the build-up of speculative excesses that often lead to market corrections.
The frenzied move comes as expectations of a friendlier regulatory approach under newly-elected President Donald Trump and Fed rate cuts are driving BTC higher. The leading cryptocurrency by market cap set new all-time highs above $97,000 early Thursday, bringing its month-to-date gains to 38%, CoinDesk data showed.
MSTR is the world’s largest publicly traded BTC holder, with a coin supply of 331,200 ($3.04 billion) that has been steadily building since 2020. At one point on Wednesday, the company was the most traded U.S. stock, even surpassing Nvidia ( NVDA ), says Eric. Balchunas, senior analyst at Bloomberg. Nvidia is almost three times the size of MicroStrategy in terms of market capitalization.
UPDATE (Nov 21, 09:17 UTC): Adds that MSTR was the most traded US stock on Wednesday in the last paragraph.
