Convertible Bonds Soar as MSTR Stock Eyes Record Highs – What Investors Should Know!

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Strategy’s Convertible Bond Prices Surge as Stock Advances Back Toward Record High

What to know:

  • Strategy’s $8.2 billion of convertible debt now carries a $5.2 billion market premium, driven by common stock’s share price climbing to $450.
  • The company’s convertible debt sales have fueled its bitcoin purchases, driving bond values higher as five of six notes trade deep in the money.

In this article

BTCBTC$119,138.86◢2.05%

Strategy’s (MSTR) aggressive bitcoin

acquisition strategy has dramatically boosted the value of its convertible debt.

As a crypto investor, I’m elated to see Bitcoin maintaining its all-time high and the company’s shares surging towards $450. This uptrend has made five out of six outstanding bonds particularly profitable, as their stock prices now exceed their conversion thresholds – a state known as ‘deep in the money’. However, the 2029 bond with a hefty conversion price of $672.40 remains just beyond my grasp for now.

A company situated in Tysons Corner, Virginia, has announced the issuance of convertible notes worth $8.2 billion, with exceptionally low average interest rates of only 0.421%. These bonds will mature anywhere between 2028 and 2032. The value of these bonds can be converted into common stock based on the prices of MSTR and BTC at the time of issue.

MSTR’s stock price has recovered significantly from its three-month low of $235 and is nearing last year’s record high of $543. This surge has increased the market value of the bonds to approximately $13.4 billion, which is around $5.2 billion more than their face value. This premium indicates the level of interest from investors in secondary markets, based on the potential for these bonds to be exchanged for valuable stocks.

More recently, Strategy has stopped releasing new convertible notes. This could be because there’s a greater sense of caution, as indicated by trends in the options market.

Starting from July 15, Mastercraft’s (MSTR) implied volatility stands at 53.1%, significantly lower than its past peaks exceeding 200%. Implied volatility serves as a gauge that reflects options traders’ expectations for the stock’s potential future fluctuations based on their market positions.

The number of open contracts stands strong at approximately 2.4 million, yet the balance between put and call options indicates a generally neutral outlook among traders. A put option represents a protective stance against potential drops in the asset’s value, while a call option is used for bullish speculation on price increases. The open interest put-call ratio (0.93) and volume put-call ratio (0.62) suggest that traders are not heavily wagering on a significant stock market upswing since they appear to be more cautious or neutral in their positions.

Furthermore, the trading volume is only about a fifth of its 30-day average, suggesting a decrease in speculative activity.

The quiet increase in MSTER’s options suggests that five out of its six convertible bonds are now profitable due to the high price of the stock. However, this doesn’t necessarily mean the same level of market excitement exists as before, which enabled the company to issue these convertibles at extremely low interest rates and advantageous terms.

Potential investors may ask for greater returns (higher yields) or lower purchase prices (lower conversion prices) when it comes to new offerings. This could result in a quicker reduction of the current shareholders’ ownership stakes.

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2025-07-16 13:11