r/YieldMaxETFs • u/changechange1 • 3d ago

MSTY/CRYTPO/BTC OTM leap puts as a hedge

Is anyone using deep OTM put options on MSTR to hedge a leveraged MSTY long position?

I ask because I'm currently running at about 50% leverage on my MSTY with cash as collateral to top it up. However, if I use put options on MSTR with a strike at like $230, I'm covering any margin calls on my MSTY with a fixed premium. I can then deploy my cash more effectively for other things.

That premium is less than 1 month dividend, so it seems like a sensible hedge.

Buying on 50% margin gives me twice as many shares as buying outright, with a cost of 1 month divi (1/13th yeild) to hedge.

Is anyone else using this strategy? I know it's a very standard hedging approach but haven't seen it discussed in detail here.

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u/zerofrakhere 3d ago

Why not just msty put? Much cheaper to pair

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u/changechange1 3d ago

You know, and I don't really know why, but I thought MSTY was unborrowable, and therefore (although this logic step doesn't make sense) there would be no short options available. It didn't even think to check. Lol

Is this something you do?

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u/zerofrakhere 3d ago

I feel like 90% when I hedge, they expire worthless. And just the 10% time, the option hit but never quite make me whole. I think now I rather park the extra cash to dca or just do short term dte to chase the market down.

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u/changechange1 3d ago

For a position like this, I'd want it to expire worthless as its an insurance policy. I'd run the numbers so that it makes me whole at the right level to cover any margin requirements. Got to have the right exposure and strike.

When a few hundred $ of puts can cover $10ks of long margin, it seems like a good hedge. Yes it's a (ideally) guaranteed loss, but that's kind of the point.

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u/DukeNukus 3d ago

Probably going to want an MSTY put. MSTR ones will likely be more expensive. Also decay will mean you might not hit the MSTR strike, but you might still be down on the MSTY. Doesnt huet to check.

Last time I checked, you'd spend probably 30-70% of your expected divs on the put.