The leveraged MSTR funds aren’t able to get enough swap exposure due to risk limitations from the dealers.

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The leveraged fund is trying to amplify its returns on MSTR stock. However, since dealers are limited in offering swaps, the fund is forced to buy options instead. This creates a lot of demand for MSTR options, driving up their prices, making it more costly for the fund to achieve its leverage goal.

If you’re new , think of swaps and options as tools for “betting” on a stock’s movement without owning it. When one tool (swaps) becomes unavailable, the fund has to overpay for the other tool (options), causing inefficiencies.

The Fund Ends up paying much more for its exposure because ,Dealer’s Can’t give enough swaps(riskL) and Options are much more expensives due to high demand..

They are using options in order to provide the leveraged delta— which has in turn pushed premiums to crazy levels.

What is a swap:

https://www.investopedia.com/terms/s/swap.asp#:~:text=A%20swap%20is%20a%20derivative,security%20can%20be%20almost%20anything

Now I RMND this: If the cost to maintain exposure outstrip their capital, the fund could, *Liquidate be forced to sell holdings, *Close if they can no longer sustain operations..

Banks and institutions providing the swaps also face risks. If MSTR Keeps rising, they might reach their risk limit $sooner. This could restrict the leveraged fund’s ability to roll over its swaps..

With skyrocketing premiums , fewer investors stand far to MSTR options. This creates an Illiquid market, make it even hard for the fund to maintain exposure..

If a leveraged fund tied to MSTR collapses or is forced to liquidate, it could cause a cascading effect.. *Other market participants holding related positions (swaps, options, or even the underlying stock) could $uffer unexpected losses.