MSTR Bearish Strategy Performance: One-Year Analysis of Puts, Inverse ETFs, and Shorting

On December 6, 2025 (EST), a Reddit user published a one-year update on bearish strategies for MicroStrategy (MSTR), noting that while the stock experienced a significant 54.72% drop from $395.29 (December 6, 2024) to $178.99 (December 5, 2025) [0], inverse ETFs (MSTZ, SMST) and most put options underperformed.

Inverse MSTR ETF MSTZ declined by 32.01% over the same period, a performance gap attributed to volatility decay— a common issue with inverse and leveraged ETFs due to compounding effects in volatile markets [0]. MSTR’s daily volatility (standard deviation) of 4.96% during the period exacerbated this decay [0].

Put option underperformance was linked to high initial implied volatility (IV) on December 6, 2024, which reached 102.30% for one-year options [1][2]. This elevated IV inflated option premiums, reducing profitability despite the stock’s directional decline. However, the discussion highlighted that deep in-the-money (ITM) puts (e.g., Jan 16, 2026 600P) outperformed with a 24% gain [0], as they are less sensitive to IV fluctuations.

Shorting the 2x long MSTR ETF (MSTU) emerged as a more profitable strategy. MSTU plummeted 92.38% from $159.10 to $12.13, translating to a ~92% gain for short sellers [0], aligning with the user’s observation about the potential of shorting 2x long ETFs of volatile stocks.

1. Structural Factors Override Directional Accuracy
   : Even when correctly predicting a stock’s decline, strategies like inverse ETFs and puts are vulnerable to volatility decay and IV levels, which can significantly erode returns.
2. Leveraged ETF Shorting as a Bearish Alternative
   : Shorting 2x long ETFs (e.g., MSTU) of volatile stocks may offer higher returns than inverse ETFs, as their leveraged structure amplifies declines in the underlying asset.
3. IV Timing and Option Type Matter
   : High initial IV reduces put profitability; deep ITM puts are more resilient to IV fluctuations, making them a better choice in high-volatility environments.
4. Max Drawdown Risk in Volatile Stocks
   : Shorting MSTR or similar volatile stocks exposes investors to significant drawdowns during temporary rallies, underscoring the need for robust risk management.

• Risks
  :
  • Volatility Decay
    : Inverse and leveraged ETFs suffer from volatility decay over long holding periods, making them less effective for sustained bearish positions [0].
  • Implied Volatility Risk
    : High initial IV can negate gains from directional bets in options [1][2].
  • Max Drawdown
    : Shorting volatile stocks like MSTR can lead to large losses if the stock rallies, even if the long-term direction is correct [0].
• Opportunities
  :
  • Shorting 2x Long ETFs
    : For volatile stocks with 2x long ETFs, shorting these instruments may capitalize on amplified declines [0].
  • Deep ITM Puts
    : These options mitigate IV risk and can offer better returns than at-the-money or out-of-the-money puts in high-volatility scenarios.

• MSTR declined 54.72% from December 6, 2024 to December 5, 2025 [0].
• Inverse ETF MSTZ underperformed with a 32.01% drop due to volatility decay [0].
• MSTU (2x long MSTR ETF) plummeted 92.38%, resulting in a ~92% gain for short sellers [0].
• MSTR’s initial IV (December 6, 2024) was 102.30%, reducing put option profitability [1][2].
• Deep ITM puts (Jan 2026 600P) outperformed with a 24% gain [0].