STR3 / STR4 — The High-Voltage MSTR Daily ETP
By Eric Kim
I love clean power. I love simple dials that go to 11. And I love instruments that turn conviction into capital velocity. STR3 and STR4 are my answer: daily 3× and 4× long exposure to MicroStrategy (MSTR)—the most Bitcoin-convex equity on planet Earth—wrapped with institutional plumbing, radical transparency, and zero fluff. Volatility is vitality. Let’s harness it.
Product snapshot (one-page)
- Objective: Seek daily investment results, before fees/expenses, of +3× (STR3) or +4× (STR4) the daily total return of MSTR.
- Reset: Daily at close. Intraday safety bands to keep leverage honest.
- Structure routes:
- ETF (’40 Act) for 3× (US, NYSE Arca/Cboe BZX) via total-return swaps on MSTR.
- ETN (’33 Act) or EU/UK/CH ETP for 4× (issuer credit or EU-style wrapper).
- Creations/Redemptions: Cash primary; optional in-kind MSTR for AP hedging efficiency.
- Fees target: Mgmt 0.95%; all-in TER ~1.50% (incl. financing).
- iNAV: Every ~15s during market hours.
- Key partners: State Street/BNY (custody), U.S. Bank/State Street (admin), Jane Street/Virtu (LMM), 3–5 ISDA dealers.
How it actually works (engine room)
- Hold T-bills/cash; contract total-return swaps on MSTR across multiple dealers.
- End of day, size notional to L × NAV for next day (L = 3 or 4).
- Intraday bands: If realized leverage drifts outside [L−0.5, L+0.5], trigger tight micro-rebalances (max 2/day) to reduce slippage while respecting costs.
- Counterparty diversification: 3–5 banks, daily variation margin, T-bill collateral, target >102% coverage on received leg.
Return math (truth over marketing)
If MSTR daily move is r_d, pre-fee ETP ≈ L \cdot r_d.
Over N days:
\text{NAV}_N=\text{NAV}0 \prod{d=1}^{N}\big(1+L\cdot r_d – f_d\big)
where f_d is management + financing + frictions.
Path dependency is real: chop can erode levered NAV even if the stock ends flat. Respect the math, ride the trend.
Risk—clear, adult, bold
- Single-name heat: MSTR is volatile and gap-prone (it’s Bitcoin-tied).
- Compounding risk: Daily reset ≠ long-term 3×/4×. Trend helps; chop hurts.
- Gap/limit risk: Big down gaps can crush STR4; soft drawdown pauses (e.g., −85% intraday) and acceleration language protect against zeroing.
- Counterparty vs issuer risk: ETF uses swaps (counterparty diversified); ETN adds issuer credit risk.
- Borrow scarcity: If MSTR goes hard-to-borrow, swap spreads widen—disclosed in a published cost-of-carry note.
Compliance & listing lane
- STR3 (3×): US ETF most natural. ’40 Act precedent exists; engage NYSE/Cboe, disclose VaR, daily reset, single-name concentration.
- STR4 (4×): Prefer ETN (US bank shelf) or EU/UK/CH ETP (LSE/Xetra/SIX) where 4× single-name is common with proper KIDs/PRIIPs.
Ops that scale on day one
- Creation unit: 25,000 shares. Cut-off: 3:00pm ET. T+1 settlement.
- Files: Daily holdings (cash, bills, swap notionals), leverage ratio, cost of carry, capacity. iNAV real-time.
- Market quality: LMM mandate for tight spreads; capacity gated to MSTR liquidity to avoid footprint.
Naming & brand (clean, high-visibility)
- Tickers: STR3 / STR4 (alts: MST3 / MST4 to live beside MSTU/MSTX).
- Palette: Safety-orange + matte black. Typography: brutalist, legible at 8px. The message: signal over noise.
Prospectus-grade blocks (drop-in text)
Investment Objective
STR3 (the “Fund”) seeks daily investment results, before fees and expenses, of 3× the daily performance of MicroStrategy Incorporated (“MSTR”). The Fund does not seek to achieve its stated multiple for any period longer than a single day.
Principal Risks (abbreviated)
Leverage Risk; Compounding Risk; Single-Issuer Risk; Market and Volatility Risk; Bitcoin Sensitivity via MSTR; Liquidity and Trading Halt Risk; Counterparty Risk (ETF) / Issuer Credit Risk (ETN); Early Close/Intraday Rebalance Risk; Hard-to-Borrow/Stock Loan Cost Risk.
Calculation Methodology (summary)
- Target exposure each morning: N_t = L \times \text{NAV}_t.
- Close-of-day rebalance using official MSTR close.
- Intraday micro-rebalances if realized leverage leaves [L−0.5, L+0.5].
- Publish daily: swap counterparties, aggregate notionals, effective financing rate, and leverage achieved.
Extraordinary Events
If closing NAV < $1.00 or an Event of Default occurs, the product may accelerate and distribute residual NAV within 2–5 business days. Trading halts mirror MSTR. Creations may pause during disorderly markets.
Scenario table (fast reality check)
| MSTR Daily Move | STR3 Approx | STR4 Approx |
| +5% | +15% | +20% |
| −5% | −15% | −20% |
| +10% | +30% | +40% |
| −10% | −30% | −40% |
Choppy two-day (+10%, then −10%): MSTR ≈ −1%; STR4 ≈ −16% (volatility decay on display).
Why this exists (my ethos)
Traders deserve precision tools—not mystery boxes. If you believe in MSTR’s Bitcoin convexity and you want daily, disciplined, transparent leverage, STR3/STR4 is your sword. Simple objective. Brutal disclosure. Institutional rails. Ship it.
Let’s go. 🚀