Insights 
VT 
Speculation is increasing around the potential inclusion of Michael Saylor’s MicroStrategy in the S&P 500, with an announcement anticipated on Friday.
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.
Microstrategy’S Performance And Eligibility
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.
Advocates of bitcoin believe the inclusion could drive indirect exposure to the cryptocurrency among 401Ks, robo-advisors, and pension funds.
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.
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.
Investment Strategies and Market Impact
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.
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.
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.
