MSTY ETF Investment Simulator

Performance-Based Decay Rates

This simulator uses separate decay rate curves depending on whether dividends are reinvested:

1. REINVESTMENT MODE (original decay rates):

• Extremely Bullish Trend (≥+36% annualized MSTR return): 0.3% monthly decay
• Strong Bullish Trend (≥+18% annualized MSTR return): 0.75% monthly decay
• Neutral Trend (-18% to +18% annualized MSTR return): 1.5% monthly decay
• Bearish Trend (≤-18% annualized MSTR return): 2.5% monthly decay

2. NON-REINVESTMENT MODE (gentler decay rates):

• Extremely Bullish Trend (≥+36% annualized MSTR return): 0.3% monthly decay
• Strong Bullish Trend (≥+18% annualized MSTR return): 0.5% monthly decay
• Neutral Trend (-18% to +18% annualized MSTR return): 1.0% monthly decay
• Bearish Trend (≤-18% annualized MSTR return): 1.5% monthly decay

Extreme Bull Market Override

• When MSTR's 3-month rolling return ≥50% annualized, NAV decay is completely eliminated (zero decay)
• This simulates how strong directional markets can reduce the need for capital erosion
• Other modifiers won't apply when this override is active

Volatility Modifiers

• Low Volatility (<40% annualized): Reduces decay by 40%
• Medium Volatility (40-70%): No change to decay
• High Volatility (>70% annualized): Increases decay by 15%

NAV Floor Protection

• Protects portfolio from excessive erosion
• Floor set at 35% of initial investment value
• Protection begins at 70% of initial NAV (early protection)
• Uses quadratic scaling curve for aggressive decay reduction as NAV approaches floor
• When NAV hits floor, decay is completely eliminated

Non-Reinvestment Reduction

• When not reinvesting dividends, all decay rates are reduced by an additional 50%
• This simulates how taking cash dividends helps preserve NAV with stronger protection
• Only applies if extreme bull market override isn't already in effect

Volatility-Aware Upside Cap

Dynamic breakeven thresholds for limiting excess returns based on volatility tier:

• Low Volatility (<40% annualized): Upside cap starts at >4% monthly return
• Medium Volatility (40-70%): Upside cap starts at >7% monthly return
• High Volatility (>70% annualized): Upside cap starts at >12% monthly return
• Above these thresholds, only 50% of excess returns are captured
• The "blue call boost" allows 25% of capped upside to be recovered due to long OTM call protection
• Simulates covered call strategies limiting upside capture in different market conditions

Other Modifiers

• Monthly Upside Override: If MSTR monthly return is ≥+25%, reduces decay by 50% for that month
• Yield Compression in Uptrends: Yield decreases by 10% when MSTR trends upward
• Extra 10% yield reduction for strong monthly MSTR gains (>10%)

Calculation Process

1. Apply MSTR return to underlying synthetic NAV
2. Apply 10% monthly market volatility (normal distribution) to reflect real-world fluctuations
3. Apply volatility-aware upside cap based on current volatility tier
4. Calculate dynamic decay rates based on all factors above
5. Apply calculated NAV erosion and base drag effects
6. Adjust dividend yield based on NAV trends and market conditions
7. Apply volatility premium boost during high-volatility periods (+2% yield when monthly move >15%)
8. Distribute monthly dividend (with optional reinvestment)
9. Apply tax if in taxable account
10. Update portfolio value and share count