Microstrategy Plunges 4.27% Amid Legal Storm—Will the Bitcoin Play Survive the Turbulence?

Summary
• Microstrategy faces a class action lawsuit over preferred stock amendment
• TD Cowen raises price target to $680 amid Bitcoin accumulation strategy
• Intraday price drops to $408.21, down 4.27% from previous close
• Options chain shows heightened volatility with 49–55% implied volatility ratios

Microstrategy’s shares have tumbled nearly 4.3% intraday amid a legal tempest involving fiduciary duty allegations and regulatory scrutiny. The stock’s sharp decline, coupled with a volatile options chain and a 52-week range of $102.40 to $543, signals a pivotal moment for this Bitcoin-linked software giant. As the stock tests key technical levels, traders are weighing short-term risks against long-term bullish potential.

Legal Fallout and Fiduciary Duty Claims Spark Sell-Off
The immediate catalyst for Microstrategy’s selloff stems from a class action lawsuit alleging the board violated Delaware law by bypassing shareholder votes on a preferred stock amendment. The suit claims the board breached fiduciary duties by altering terms of the STRK perpetual preferred stock without proper approval, including adjustments to liquidation preferences. This legal uncertainty, combined with the company’s inability to predict case outcomes, has triggered risk-off sentiment. Meanwhile, the lawsuit intersects with broader investor skepticism about the company’s aggressive Bitcoin treasury strategy, as the stock’s dynamic PE ratio of -6.84 highlights earnings challenges.

Options Playbook: High-Leverage Puts for Volatility-Driven Short-Term Moves
• 200-day average: 335.25 (well below current price)
• RSI: 67.41 (neutral to overbought)
• MACD: 14.15 (bullish crossover with signal line at 13.56)
• Bollinger Bands: Price near middle band (413.03), suggesting consolidation

Microstrategy’s technicals present a mixed picture: while long-term bullish trends persist (52-week high of $543), short-term bearish momentum is evident. The stock is testing the 200-day MA of $335.25 and sits just below the middle Bollinger Band. For traders, the key is balancing exposure to near-term volatility with respect for the company’s Bitcoin-driven thesis. Two options stand out:

• MSTR20250801P390 (Put):
- Strike: $390
- Expiration: 2025-08-01
- IV: 49.09% (moderate)
- Delta: -0.28 (positioned for moderate downside)
- Gamma: 0.0102 (reactive to price swings)
- Turnover: $391,396 (liquid)
- Leverage ratio: 67.01% (high)
- Payoff in 5% downside scenario: $10.21 per share (max profit if price falls to ~$387.70).
- This put offers a high-leverage play on a potential breakdown below $390, with gamma and turnover supporting liquidity.

• MSTR20250801P392.5 (Put):
- Strike: $392.5
- Expiration: 2025-08-01
- IV: 48.78% (moderate)
- Delta: -0.31 (sensitive to 30%+ price moves)
- Gamma: 0.0107 (strong sensitivity)
- Turnover: $472,921 (high liquidity)
- Leverage ratio: 59.73% (solid)
- Payoff in 5% downside scenario: $12.50 per share (max profit if price falls to ~$390).
- This put provides a slightly tighter trigger point ($392.50) with stronger delta and gamma for a sharper move.

Action Insight: Aggressive short-sellers may target the $390–392.50 range, but buyers could step in if the stock rebounds above $415 (middle Bollinger Band). Watch for a $361.79 (lower Bollinger) breakdown as a bearish signal.

Backtest Microstrategy Stock Performance
The backtest of MicroStrategy (MSTR) after an intraday plunge of at least -4% shows favorable performance metrics across various time frames. The 3-Day win rate is 56.37%, the 10-Day win rate is 58.66%, and the 30-Day win rate is 65.85%. This indicates that MSTR tends to rebound strongly from such events, with an average return of 1.70% over 3 days, 4.67% over 10 days, and 15.12% over 30 days. The maximum return during the backtest period was 26.93% on day 59, suggesting that MSTR can deliver significant gains in the month following a substantial intraday dip.

Navigating the Legal Crossroads: What’s Next for Microstrategy?
Microstrategy’s near-term trajectory hinges on two variables: the lawsuit’s legal and reputational fallout and the stock’s ability to hold above $368.29 (200D support). While the company’s Bitcoin treasury strategy remains a long-term tailwind, today’s volatility underscores the risks of speculative positioning. Sector leader Microsoft (MSFT) is down 0.24%, suggesting broader tech-sector caution. Investors should monitor the $408.21 intraday low as a critical support level—break below this, and the 200-day MA at $335.25 becomes the next test. For now, the path of least resistance appears bearish, but TD Cowen’s $680 price target hints at asymmetric potential for those with a multi-month horizon.