MicroStrategy Math Update: How I’m Managing the Numbers

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Investing isn’t just about picking the right stock — it’s about understanding the numbers behind every move. In this blog, I’ll break down my latest MicroStrategy (MSTR) trade, explaining how I’ve managed to stay profitable even in a declining market using covered calls. If you’ve been following the MicroStrategy playlist, this is the perfect update to see how the numbers add up.

Market Overview

We’re back in a green market after a few days of uncertainty. MicroStrategy is up about $20 today, and although the stock has experienced significant drops over the past few months, the income strategy I’m applying has helped me stay afloat.

Since I started this position in November 2023, MicroStrategy has fallen from $477 to as low as $210. Despite this, I’ve been able to generate steady income using my cash flow machine strategy. Let’s break down how that works.

My MicroStrategy Position

Long Position: I own 10 contracts of 175 calls.
Short Position: I sold 10 contracts of the 307.50 calls.
Stock Price: The current stock price is $324.

Since the stock price is now well above my short call strike price, some of the contracts have moved in the money. However, the majority of the value I’m capturing is through the juice — the extrinsic value from selling calls.

Understanding the Math

Here’s how the math works:

Base Position Cost: $286,795
Current Value: $156,400
Loss on Base Position: $130,000

But that’s not the whole story. Through covered calls, I’ve earned consistent income:

Total Juice Collected: $133,000 in 4 months
Weekly Income Goal: $10,600 per week

This income has helped offset the drop in the stock’s value, effectively keeping my trade in the green. Even though the stock price fell significantly, I maintained positive cash flow, which is the ultimate goal.

Why Covered Calls Work in a Down Market

Covered calls are powerful because they allow you to generate income even when stock prices decline. By collecting premiums (the juice) from selling calls, you can continue to bring in cash flow while waiting for the stock to recover.

The Key Benefits of This Strategy:

Income Generation: I’ve made over $133,000 in premium income despite the falling stock price.
Risk Management: Selling covered calls reduces potential losses.
Market Flexibility: You can adjust your strategy weekly depending on market movements.

The Path Forward

Now that the market is showing green, my goal is to continue collecting $10,600 per week using covered calls. If MicroStrategy continues to recover, my profits will accelerate. If it doesn’t, I’ll still generate steady income from the juice.

It’s like owning an Airbnb — you don’t worry about the short-term fluctuations in property value as long as your tenants keep paying rent. Similarly, I focus on the weekly income rather than the daily ups and downs of the stock.

Life Improving Tips

Focus on Income, Not Just Stock Value: Just like a rental property provides consistent income, applying a covered call strategy allows you to generate cash flow, reducing your reliance on stock price appreciation. This mindset shift can create long-term financial stability.
Stay Calm in Market Volatility: Emotional decisions often lead to losses. Instead, maintain a clear focus on your strategy and trust the numbers. Generating reliable income through covered calls ensures you’re not solely dependent on market movements.
Track and Adjust Regularly: Reviewing your trades weekly helps you stay aligned with your financial goals. Adjust your strike prices and monitor market trends to maximize your income potential.
Diversify Your Income Sources: Combining covered calls with other income-generating investments like dividends or real estate can provide a balanced and secure financial future.
Develop a Resilient Mindset: Markets will rise and fall, but by focusing on cash flow instead of stock price swings, you gain peace of mind. This approach keeps you in control, even during uncertain times.

FAQs

What are covered calls?
Covered calls involve selling call options on stocks you own to generate income. You collect a premium from the buyer, providing consistent cash flow.
Why not just hold the stock?
Holding stocks without selling calls means you only profit if the stock price rises. Covered calls allow you to earn income in any market condition — up, down, or sideways.
Is it risky to sell covered calls?
While there is some risk if the stock rises significantly, covered calls generally reduce risk compared to holding stocks alone. Plus, they provide downside protection.
Can I apply this strategy to other stocks?
Absolutely. This strategy works best with volatile stocks that have high option premiums, like MicroStrategy.
How do I know which strike price to choose?
Choosing the right strike price depends on your market outlook and risk tolerance. Out-of-the-money calls provide more upside potential, while in-the-money calls offer greater protection.

Call to Action

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Conclusion

Through careful management and a consistent covered call strategy, I’ve turned a challenging MicroStrategy position into a steady income stream. My focus is on weekly income generation rather than stressing over short-term stock price fluctuations.

Whether the market goes up, down, or sideways, the cash flow machine strategy ensures I’m always making money.

MicroStrategy Math Update: How I’m Managing the Numbers

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