It was a pleasure to welcome Victor Haghani, the Founder and CIO of Elm Wealth Management back to the Alpha Exchange for an engaging discussion on those turbo-charged financial products called leveraged ETFs. Our conversation is focused on the large product suite built around MicroStrategy, a software company whose mission appears to be solely focused on the accumulation of bitcoin. Itself a stock realizing 75 to 150 vol, MSTRs two times daily return products – MSTU and MSTX – have experienced one month delivered volatility levels approaching 400.
Victor shares the recent work he and team have done to model scenarios for these products based on price and vol assumptions for MSTR. The punchline is that investors need to carefully consider the risk exposure they are getting and be prepared for potentially large losses should the underlying stock fall and volatility rise. In the course of our discussion, we contemplate the directionality of the MSTR premium to its holdings of bitcoin and whether that is itself linked to the price of bitcoin.
Lastly, we touch on a new product proposed by ETF provider Battleshares that targets a daily long/short exposure to two assets, for which the Elm team has built a model and posted on their website. I hope you enjoy this episode of the Alpha Exchange, my conversation with Victor Haghani.