MSTY ETF Investment Simulator

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 →

💰 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

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
• Month 1 Special Processing:
  • For the first month only, NAV exactly equals the Initial Share Price
  • Portfolio Value = Number of shares × Initial Share Price
  • All NAV adjustments (erosion, drag, volatility, etc.) start in Month 2
• 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
  • Streamlined data table with month-by-month metrics showing shares, dividends, and portfolio values
  • Toggle between monthly and yearly data views for different analysis perspectives

⚠️ Model Limitations

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

🚨 Assumptions & Realism Disclaimer

For transparency, all simulation results now include an Assumptions & Realism Disclaimer that highlights important context:

• The simulation assumes dividend yields and underlying asset returns remain stable throughout the investment period
• In real markets, rising underlying prices typically compress option yields, reducing dividend income during bull markets
• Sustained high yields plus high asset growth is uncommon and may overstate realistic long-term performance
• While drag factors (taxes, reinvestment friction, volatility) are modeled, they may not fully capture future market dynamics
• Results represent a plausible but aggressive bullish case - real-world results may vary significantly

✅ 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.

📌 Common Questions About Simulation Results

Why do some simulations show very high returns?

The simulator uses user-defined assumptions about MSTR price appreciation and applies them consistently throughout the simulation. If you enter high annual returns for MSTR and enable dividend reinvestment, results will naturally compound quickly — especially over longer timeframes.

However, the simulator includes various drag, decay, and cap mechanisms to prevent unrealistic results. Still, it's up to you to test different market scenarios and use conservative assumptions if you want more grounded outputs.

Does this model include market crashes or sharp drawdowns?

Yes — the simulator includes:

• Market crash events (random 20-50% drawdowns every few years)
• Volatility drag
• Upside capping
• Structural NAV decay

These help simulate stress periods. However, no model perfectly predicts real-world crashes or extreme volatility. Always assume simulated results may be smoother than real markets.

Why does the portfolio sometimes lose value even when MSTR goes up?

MSTY's yield and NAV are influenced by:

• Options strategy decay
• Low volatility environments (less premium earned)
• Return of Capital payouts
• Ongoing structural erosion

Even if MSTR rises, these factors can slow or even reverse growth — especially if MSTR appreciation is moderate and volatility is low.

Is this financial advice or a guarantee of returns?

No. This is an educational tool.

It helps you test what-if scenarios and explore how yield, NAV erosion, and price appreciation interact — but does not predict future performance. Always consult your own research or a financial advisor before investing.

Why does dividend reinvestment make such a big difference in outcomes?

If dividends are withdrawn, NAV erosion compounds faster.

If dividends are reinvested, some erosion is offset and compounding takes effect. Over long periods, this difference becomes significant — which is why the simulator lets you test both scenarios.

Can I trust the results?

The simulator aims to be realistic but cautious.

It builds in:

• Structural NAV decay
• Yield scaling and compression
• Upside caps
• Contango drag
• Crash scenarios

That said → results are still estimates. They depend on your inputs and assumptions about MSTR, volatility, and yield behavior.