ETF issuer T-Rex Group has recently filed applications for new ETFs that take long and short positions on Microstrategy.
Microstrategy is well known for its volatility due to its strong exposure to Bitcoin.
T-Rex Group’s New ETFs
The T-Rex 2X Long MSTR Daily Target ETF aims to achieve 200% of Microstrategy’s daily performance. This long position amplifies MSTR’s price movements, which are already volatile due to the company’s correlation with Bitcoin.
Additionally, T-Rex has also applied for an ETF that would take a 2x inverse position on MSTR. These two products allow investors to bet on the rise or fall of Microstrategy’s stock, while being heavily exposed to Bitcoin’s movements.
Volatility and Market Context
Microstrategy is known for its volatility due to its significant exposure to Bitcoin. Currently, the implied volatility of the stock is high at 85.6, although it has decreased compared to its recent average as the price of Bitcoin remains stable. Recently, the company’s CEO, Michael Saylor, announced that the firm had offered $800 million in convertible bonds to increase its Bitcoin holdings.
Expert Analysis and Competitors’ Initiatives
Bloomberg ETF analyst Eric Balchunas has written that these ETFs will likely be the most volatile ever seen in the United States, with a volatility 20 times higher than that of the SPX. He compared these ETFs to ‘ghost pepper’ in the world of spicy ETF sauces, highlighting their extremely speculative and risky nature.
T-Rex is not the only issuer exploring products linked to MSTR. Issuers like Defiance and GraniteShares have also listed products that take short positions on Microstrategy. In March, T-Rex also filed applications for six inverse Bitcoin ETFs, ranging from 1.5x to 2x positions.
