Five of Six Convertible Notes Now Deep in the Money Amid Bitcoin Gains
The value of Strategy’s $8.2 billion in convertible debt has surged, now trading at a $5.2 billion premium, as the company’s common stock approaches its all-time high near $543. With bitcoin (BTC) holding steady around $119,000, investor sentiment toward Strategy’s long-term crypto-driven strategy appears to be regaining traction.
At present, five out of six of the firm’s convertible notes are trading deep in the money, a term used when the company’s share price exceeds the bond’s conversion price. These bonds, which convert into equity if the underlying stock meets predefined levels, are now significantly more valuable than their original issuance terms.
Convertible Notes Reflect Strong Equity Upside
The notes, issued between 2028 and 2032, carry ultra-low average coupons of just 0.421%, offering minimal interest in exchange for the potential to convert into equity. Only the 2029 note, with a conversion price of $672.40, remains out of reach. All others are positioned to yield strong returns to bondholders if converted.
Strategy’s share price has rebounded sharply from a recent low of $235, climbing back toward the $450 mark, largely supported by steady bitcoin accumulation and broader market optimism.
Options Market Shows Caution Despite Equity Strength
Despite the stock rally, implied volatility for Strategy has dropped to 53.1%, a far cry from previous spikes above 200%. This suggests that traders are more cautious, avoiding extreme bullish or bearish bets.
Volume data supports this: trading activity is only 20% of the 30-day average, and the put-call ratios (0.93 for open interest and 0.62 for volume) indicate neutral sentiment. Investors appear more focused on long-term exposure rather than short-term speculation.
No New Convertibles—A Strategic Pause?
With the market less frothy than during previous funding waves, Strategy has paused new convertible note issuances, possibly reflecting a shift in investor appetite or internal risk management.
Nonetheless, the firm’s convertible debt strategy has created billions in paper gains, rewarding those who believed in its crypto-forward vision. Should Bitcoin extend its rally and Strategy’s stock breach previous highs, further gains in both the equity and debt markets remain possible.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.