In this podcast episode, the discussion centers on the intricate financial strategies behind MicroStrategy's convertible bonds. The speaker highlights that bondholders primarily engage in gamma trading, which allows them to profit from market volatility, regardless of whether prices rise or fall, as opposed to traditional delta trading that focuses on price increases. MicroStrategy's significant volatility, driven by its Bitcoin growth narrative, draws in these bondholders, who employ delta hedging to stay neutral while capitalizing on price fluctuations. The speaker contends that MicroStrategy's future hinges on sustaining this high volatility, arguing that the company's reported Bitcoin profits are misleading. Essentially, they are selling overpriced equity to finance Bitcoin acquisitions, all while leveraging shareholders' faith in a growth story. In the end, it’s the shareholders who bear the risk and are likely to lose in this zero-sum game.
