MicroStrategy (MSTR) is experiencing an impressive surge in volatility, now 2.5 times that of Bitcoin, opening the door for potential profits but also introducing higher risks for options traders.

As the largest publicly traded holder of Bitcoin, MicroStrategy holds more than 380,000 BTC. This year, the company’s stock has surged by 500%, as investors looking to gain exposure to Bitcoin without directly owning the cryptocurrency have driven its value higher. In comparison, Bitcoin has seen a 124% increase this year, according to CoinDesk and TradingView data.

In addition to the rise in stock price, MSTR has seen a sharp increase in implied volatility. As of Monday, MSTR’s 30-day implied volatility (IV) was at an annualized 140.86%, according to OptionCharts.com. This is 2.5 times higher than Bitcoin’s 30-day IV, which stands at 55.65%, based on Deribit’s DVOL index. The higher IV reflects market expectations for more dramatic price fluctuations in MicroStrategy shares than in Bitcoin.

For options traders, high implied volatility presents an opportunity to generate more income. When volatility increases, options premiums—essentially the price paid to buy options—also rise, making it more lucrative for traders to write or sell call and put options. This allows traders to collect larger premiums when they sell these contracts.

A common strategy for traders holding the underlying asset is the covered call strategy, where they sell call options at strike prices significantly higher than the current market price of the asset. In this case, by writing covered calls on MSTR stock, traders can earn additional income from the premiums while still holding the shares. If the market moves upward, the gains from the underlying shares typically compensate for any losses on the sold calls.

Given MSTR’s higher volatility, a covered call strategy could generate returns up to 2.5 times greater than using Bitcoin options, making it an attractive prospect for traders looking to capitalize on MicroStrategy’s price swings. This has sparked discussions across trading communities, with many looking to “monetize MSTR volatility.”

However, it’s crucial to remember that the covered call strategy has its limitations. While it allows traders to earn extra income, it caps the upside potential of the position. If MSTR sees a significant rally, traders who have written covered calls may miss out on substantial profits, which may make simply holding the shares a more profitable choice in certain scenarios.