Speculation is increasing around the potential inclusion of Michael Saylor’s MicroStrategy in the S&P 500, with an announcement anticipated on Friday.<\/p>\n
Recent changes to the index, which is rebalanced quarterly, saw additions like Jack Dorsey’s Block in July. Other candidates for this round are Robinhood and Applovin.<\/p>\n
MicroStrategy was a top performer in 2024, boasting a market cap just under $98 billion and a bitcoin holding of 636,505 BTC valued at nearly $71 billion. The company satisfies all criteria for the S&P 500, including US domicile, a market cap over $22.7 billion, and sufficient liquidity.<\/p>\n
Advocates of bitcoin believe the inclusion could drive indirect exposure to the cryptocurrency among 401Ks, robo-advisors, and pension funds.<\/p>\n
With a potential S&P 500 inclusion announcement for MicroStrategy expected this Friday, September 5th, we are looking at a massive binary event. This means we should prepare for extreme volatility in MSTR’s stock and its derivatives. The outcome will likely trigger a significant price swing, making options strategies focused on volatility the primary play.<\/p>\n
The bull case is that inclusion forces passive index funds to buy the stock, creating a huge, guaranteed demand surge. We are seeing implied volatility on MSTR’s weekly options spike above 150%, suggesting traders are pricing in a move of 15% or more. A long call spread could be a way to bet on the upside while defining risk, given how expensive outright calls have become.<\/p>\n
We saw a similar situation back in December 2020 with Tesla’s inclusion, which caused the stock to rally nearly 70% between the announcement and the effective date. If MSTR is added, we could see a front-running effect where traders buy ahead of the index funds. Those funds, which manage over $11 trillion, would need to acquire an estimated $20 billion worth of MSTR shares to match the index weighting.<\/p>\n
This event makes MSTR’s price temporarily less about Bitcoin’s daily movements and more about these technical market mechanics. The massive inflow of capital would be an MSTR-specific catalyst, potentially causing its premium over its underlying Bitcoin holdings to expand significantly. Therefore, we should view this as a separate event from the broader crypto market for the next few weeks.<\/p>\n
Conversely, a rejection from the index would likely cause the speculative premium to collapse, sending the stock price sharply lower. To play both sides of this volatility, a long straddle, which involves buying both a call and a put option, could be effective. This strategy profits from a large move in either direction, though the high implied volatility makes it an expensive position to open.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Speculation grows as MicroStrategy nears potential S&P 500 inclusion, driven by bitcoin holdings and market performance.<\/p>\n","protected":false},"author":62,"featured_media":16990,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-30165","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t