MicroStrategy has sold over $6 billion in convertible notes to buy Bitcoin this year, and hedge funds buy it for arbitrage bets

Odaily Planet Daily News: Eli Pars, Co-Chief Investment Officer of Calamos Advisors LLC, is one of the buyers of the over $6 billion convertible notes sold by MicroStrategy this year, which are used to continuously expand its Bitcoin reserves. Like many other managers, Pars used these notes for market-neutral arbitrage bets, taking advantage of the underlying asset's violent fluctuations. "Convertible bonds are a way for issuers to monetize stock volatility, and MicroStrategy is an extreme example," Pars said, with his company holding over $130 million in MicroStrategy notes, employing both long and arbitrage strategies. MicroStrategy has purchased about $13.5 billion in Bitcoin since October 31 and issued $3 billion in zero-interest convertible notes, the company's fifth bond issuance this year. These low-interest long-term notes currently have an outstanding amount of over $7 billion, and can be converted into stocks if the share price rises above a certain level. Hedge funds buy these notes to deploy their own convertible arbitrage strategies, with companies like AQR Capital Management and Man Group implementing such strategies elsewhere. This is one of the hottest strategies on Wall Street this year. "This trade is attractive because the implied volatility of the convertible bonds is far lower than the actual volatility or option-implied volatility," Pars said, noting that even in the convertible bond space, MicroStrategy is a "very rare opportunity," especially considering the scale and volume of the issuance. MicroStrategy founder Michael Saylor stated in a CNBC interview: "Our job is to connect the traditional capital markets, which need bonds, fixed income, equities or options, and we are combining those markets with the crypto economy and using Bitcoin to do that."