JPMorgan increased its holdings of Strategy shares and put options before MSCI’s planned removal of the company from U.S. indexes. The bank held 848,932 shares as of Sept. 30, up about 36% from June, while put options covered 1,148,500 shares, a roughly 60% increase. The positions come as index changes could prompt passive funds to sell, but the filing does not explain their purpose.
JPMorgan’s shares and puts both increased
JPMorgan’s third-quarter 13F filing showed it held 848,932 Strategy shares worth about $131.3 million at the end of September. At the end of June, it held 624,387 shares. Formerly known as MicroStrategy, Strategy is one of the largest publicly traded holders of bitcoin, leaving its share price exposed to moves in the cryptocurrency market.
The bank’s put options covered 1,148,500 shares, more than its direct shareholding. That compared with 715,700 shares covered at the end of June. Puts can provide some protection against a share-price decline, but the filing does not specify how JPMorgan used the options. The disclosures are not enough to establish the bank’s overall view of Strategy stock.
13F filings do not separate client and proprietary positions
Large U.S. investment managers file 13F reports each quarter. JPMorgan’s filing covers the bank and 17 affiliated entities, and reported positions may include client accounts as well as trading inventory. The share and options figures therefore do not necessarily represent a directional investment by a single JPMorgan business unit.
The data show positions at Sept. 30, not current holdings. The filing also does not disclose when the trades took place, their cost or the specific strategy involved. An increase in both shares and puts alone does not establish that they were part of a paired trade.
MSCI removal could trigger passive selling
MSCI has said companies whose assets are primarily investment holdings, rather than operating businesses, will no longer be eligible for the relevant indexes. Strategy is included in the planned removal from U.S. indexes, which is scheduled to take effect on Nov. 30. Index funds typically adjust their portfolios when benchmark constituents change, so the removal could lead to passive selling.
JPMorgan analysts previously estimated that losing index eligibility could lead index funds to sell about $2.8 billion worth of Strategy shares. That is an estimate of potential flows, not a tally of sales that have already occurred. As the effective date approaches, attention is on how index funds carry out the adjustment and whether other investors absorb the shares. The latest holdings disclosure does not resolve either question.