MSTY ETF Investment Simulator

Comprehensive Guide

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TL;DR

This simulator helps you understand the real risks and rewards of investing in a high-yield Bitcoin proxy like $MSTY — before putting real money on the line.

It models how your portfolio might perform over time as you earn MSTY's massive dividends, while accounting for real-world risks like NAV erosion, market volatility, and structural drag.

The simulator emulates performance of a high-yield ETF that synthetically tracks MicroStrategy ($MSTR) via options overlay, not by directly holding MSTR shares.

With this tool, you can:

  • ✓ Adjust key assumptions: MSTR return, dividend yield, tax rate, reinvestment
  • ✓ Simulate 500 possible market paths
  • ✓ Visualize how your portfolio might grow (or shrink)
  • ✓ See the impact of crashes, volatility, and upside caps
  • ✓ Compare reinvesting vs. withdrawing dividends
  • ✓ Understand how a 140% yield can still result in negative returns

How to Use This Simulator

🎯 For Conservative Estimates

  • Use modest MSTR return assumptions (e.g., 0.10 = +10%)
  • Focus on the minimum final portfolio value in the results
  • Default 500 simulation runs provide statistically significant results
  • Note: All simulations now include realistic market volatility by default

📊 For Yield & NAV Dynamics

  • Use the dynamic yield toggle (enabled by default) to compare realistic vs. fixed-yield scenarios
  • Adjust MSTR return to test how NAV decay responds:
    • Strong Bull (≥30%): 0.3% monthly decay
    • Moderate Bull (≥15%): 0.75%
    • Neutral: 1.5%
    • Bearish (≤-15%): 2.5%
  • Observe how volatility or trend affects yield scaling
  • Try fractional holding periods (e.g., 2.5 years)

🧾 For Tax Planning & Distribution Strategy

  • Compare taxable vs. tax-deferred outcomes
  • Toggle reinvestment off to simulate passive income mode
  • See how NAV erosion slows by 50% in passive income mode (no reinvestment)
  • Explore the trade-off between NAV preservation and compound growth

How It Works (Simplified)

🧱 Advanced NAV Decay Logic

MSTY's NAV (net asset value) erodes over time due to its structure, but with sophisticated protection mechanisms:

  • Dual decay curves: Separate gentler rates when not reinvesting dividends
  • Performance-based tiers: Four levels of decay based on MSTR's rolling returns
  • Extreme bull market override: Zero decay when MSTR's 3-month return exceeds 50% annualized
  • Volatility modifiers: 40% reduced decay in low volatility, 15% increase in high volatility
  • Non-reinvestment bonus: Additional 50% decay reduction when taking dividends as income
  • Enhanced floor protection: Decay gradually reduces starting at 70% of initial NAV
  • Higher safety floor: Decay completely stops at 35% of your starting investment
  • View detailed NAV decay documentation →

Statistical Confidence: All simulations now use 500 Monte Carlo iterations by default to provide more reliable and consistent results.

💰 Dividend Yield Logic

Your starting yield is adjustable, but real-world ETF behavior is modeled:

  • Yield compression during strong MSTR uptrends (simulating call options limiting upside)
  • Yield boost in high-volatility months (more options premium = higher income)
  • Yield reduction when NAV drops from peak (fund conserves capital)
  • Reinvestment slippage: 5% is lost when compounding due to friction (bid-ask spreads, timing mismatch, partial share inefficiencies)

⚠️ Event-Based Risk Logic

To make simulations realistic, random risk events are introduced:

  • Volatility-aware upside capping: Only 50% of MSTR gains above dynamic thresholds are captured (Low volatility: >4%, Medium: >7%, High: >12%)
  • Market crashes: 20% chance every 3 years of a sharp 30–50% drawdown
  • Futures contango drag: 15% chance every 6 months of a 5–15% NAV loss

Full Technical Breakdown

🔧 Inputs You Control

  • Initial Investment
  • Initial Share Price (optional) - Enter the price you paid per share
  • Holding Period (1–50 years, including decimals)
  • Dividend Yield (e.g., 1.43 = 143%)
  • MSTR Return (annualized base case)
  • Tax Rate (for dividend + cap gains treatment)
  • Account Type (Taxable vs. Tax-Deferred)
  • Reinvestment toggle (on/off)
  • Dynamic dividend yield toggle (on by default, reflects real-world option income behavior)
  • Run multiple simulations toggle (for statistical analysis)

Note: All simulations now include realistic market volatility by default (10% monthly NAV fluctuations).

📉 Advanced NAV Decay Model

View the detailed NAV decay documentation for complete information on the sophisticated erosion model.

Performance-Based Decay

Two separate decay curves based on investment mode:

1. REINVESTMENT MODE (original decay rates):
Based on 3-month rolling MSTR returns:

  • ≥36% annualized: 0.3% monthly decay
  • ≥18%: 0.75%
  • -18% to +18%: 1.5%
  • ≤-18%: 2.5%

2. NON-REINVESTMENT MODE (gentler decay rates):
Based on 3-month rolling MSTR returns:

  • ≥36% annualized: 0.3% monthly decay
  • ≥18%: 0.5%
  • -18% to +18%: 1.0%
  • ≤-18%: 1.5%

Extreme Bull Market Override

  • When MSTR's 3-month rolling return ≥50% annualized, NAV decay is eliminated (0%)
  • Simulates how strong directional markets prevent capital erosion

Volatility-Based Modifier

Based on 3-month standard deviation:

  • ≤40% volatility: 40% reduction in decay (improved from 25%)
  • ≥70%: 15% increase (reduced from 25%)
  • 40–70%: No change

Non-Reinvestment Modifier

  • When dividends are not reinvested, all decay rates are reduced by 50%
  • Only applies if extreme bull market override isn't already active
  • Simulates stronger NAV preservation due to cash withdrawals

Enhanced NAV Floor Protection

  • Protection begins at 70% of initial NAV (earlier than before)
  • Uses quadratic scaling for more aggressive protection as NAV falls
  • Prevents NAV from falling below 35% of original investment (improved from 25%)

Upside Override

  • If MSTR gains >25% in a month, NAV decay is cut by 50% for that month
  • Stacks with other modifiers

📉 Dynamic Yield Modifiers

  • NAV Drop Scaling
    • 20–50% drop: yield cut by 20%
    • 50–75%: cut by 50%
    • 75%: cut by 75%
    • Yield floor = 25% of original
  • Volatility Yield Boost
    • If monthly MSTR move >15%, yield increases 10–15%
  • Trend-Based Compression
    • Yield drops 2–10% during consistent MSTR uptrends
  • Reinvestment Slippage
    • 5% efficiency loss when compounding dividends

🔁 Event-Based Risks

  • Upside Capping
    • Volatility-aware: 50% capture of excess returns above dynamic thresholds (Low volatility: >4%, Medium: >7%, High: >12%)
    • "Blue call boost": 25% of capped upside is recovered via long OTM call protection
  • Crashes
    • Every 3 years (20% chance), -30% to -50% NAV hit
  • Contango Drag
    • Every 6 months (15% chance), NAV loses 5–15%

💹 Share Price Calculation

The simulator provides accurate share-based calculations with two options:

  • With "Initial Share Price" field (recommended for accuracy):
    • Enter the actual price you paid per MSTY share
    • Initial shares = Your initial investment ÷ Price per share
    • Example: $10,000 invested at $20 per share = 500 initial shares
  • Without "Initial Share Price" field:
    • Default assumes $20.00 starting price per share
    • Initial shares = Your initial investment ÷ $20.00
  • NAV changes and dividend calculations always use the current NAV, regardless of initial price

📈 Simulation Engine

  • Runs 500 Monte Carlo simulations by default
  • Provides statistical confidence by averaging across multiple scenarios
  • Each simulation path has unique volatility and random event timing
  • Smooths out extreme outcomes to show realistic expected results
  • Outputs:
    • Final portfolio value (average / minimum / maximum)
    • Total dividends received
    • NAV chart showing performance over time
    • Detailed data table with month-by-month metrics

⚠️ Model Limitations

  • Does not guarantee future results
  • Uses simplified statistical distributions
  • Does not reflect future regulatory/tax changes
  • Abstracts away option execution details

✅ Key Assumptions

  • Option premiums distributed monthly
  • Synthetic exposure approximates MSTR (not perfect)
  • No transaction costs modeled beyond slippage

Conclusion

This simulator is your sandbox for stress-testing $MSTY. It shows how an ETF that looks like free money on the surface — 140%+ yield! — can still carry real risks.

By modeling volatility, NAV decay, yield shrinkage, and payout drag, it gives you a far more realistic view of how things might play out. Run your own assumptions. Compare reinvesting vs. withdrawing. And get clear on the trade-offs before allocating real capital.