Bond Pricing 101
The most important thing to understand about preferred stocks: price and yield move in opposite directions. Here's the simple math — and an interactive calculator so you can see it in real time.
The Inverse Relationship
Preferred stocks — and bonds — work like this: the dividend payment is fixed. What moves is the price. And price and yield always move in opposite directions.
Yield = Annual Dividend ÷ Price
Or flipped around: Price = Annual Dividend ÷ Yield
📈 Price Goes Up → Yield Goes Down
STRD pays $10/year. If it trades at $100, the yield is 10%. If everyone loves STRD and buys it up to $200, the yield drops to 5% ($10 ÷ $200). Same payment. Lower percentage return on what you paid.
📉 Price Goes Down → Yield Goes Up
If STRD drops to $50, the yield jumps to 20% ($10 ÷ $50). The company still pays $10. But you paid $50 for it, so your percentage return doubled. Higher yield = lower price, always.
This is why STRD currently shows a yield around 15%: it's trading at a discount to its theoretical "fair value." The question is: fair value at what comparable interest rate? That's where it gets interesting.
The Yield Table — Price at Different Yields
Here's what each product would be worth at different market yield levels. This tells you a lot about where prices might go as the market evolves.
| Market Yield | STRF Price ($10 ÷ yield) |
STRK Price ($8 ÷ yield) |
STRD Price ($10 ÷ yield) |
What This Implies |
|---|---|---|---|---|
| 4% | $250.00 | $200.00 | $250.00 | Investment grade / Treasury equivalent |
| 6% | $166.67 | $133.33 | $166.67 | High-grade corporate bond territory |
| 8% | $125.00 | $100.00 | $125.00 | Investment grade preferred range |
| ~9.9% | $101.00 ← | 📍 STRF current market price | ||
| 10% | $100.00 | $80.00 | $100.00 | Par value / current STRC territory |
| ~10.1% | $79.00 ← | 📍 STRK current market price | ||
| ~13.2% | $76.00 ← | 📍 STRD current market price | ||
| 15% | $66.67 | $53.33 | $66.67 | High-yield / junk bond territory |
| 20% | $50.00 | $40.00 | $50.00 | Distressed / speculative |
The thesis: as Bitcoin matures as an asset class and Strategy's credit becomes better understood, the market will price these preferred stocks at lower yields (like investment-grade preferreds from blue-chip companies). If STRD compresses from 15% to 8% yield, the price more than doubles from $67 to $125. You'd collect dividends and see capital appreciation.
Interactive Yield Calculator
Move the slider to see what each preferred stock would be worth at different market yield levels.
Current prices: STRD ~$76 (≈13.2% yield) · STRF ~$101 (≈9.9%) · STRK ~$79 (≈10.1%)
The slider shows you the price each product should trade at if the market demanded a given yield. At 10% yield, STRD and STRF would trade at $100. At 6%, they'd trade at $166. Today, STRD trades at $67 — implying the market is pricing it like a ~15% yield instrument. That discount is either an opportunity or a warning, depending on what you believe about Strategy's durability.
Why Does STRD Trade at a Discount?
Fair question. If the math looks this good, why isn't everyone buying STRD until the price rises to par?
- Bitcoin risk: The market is pricing in the possibility that Bitcoin crashes and Strategy struggles to pay dividends.
- Newness: These are relatively new securities. Institutional investors move slowly. ETFs that hold them haven't fully launched yet.
- Optional dividends: STRD's dividends are technically at the company's discretion (though heavily incentivized to pay).
- Leverage risk: Strategy uses leverage — preferred shareholders are exposed to that, even if they're senior in the stack.
The counter-argument: Strategy holds 700,000+ Bitcoin. Annual dividend obligations on all preferred stock combined are measured in the tens of millions. The company could sell a fraction of a percent of its Bitcoin to fund years of dividends. The overcollateralization is extreme.