$STRC: the carry trade, priced honestly

$STRC is Strategy Inc's Variable Rate Series A Perpetual Stretch Preferred Stock. It is listed on Nasdaq under the ticker STRC, has a $100 par value, and pays a cash dividend monthly. The dividend rate is set monthly by Strategy's board — at the time of writing, it has been adjusted six times since the security IPO'd in late July 2025. The reported trajectory: 9.00% in August 2025, 10.00% in September, 10.25% in October, 10.50% in November, 10.75% in December, 11.00% in January 2026, 11.25% in February, 11.50% in March, and held at 11.50% for April and May. We pulled this from the company's own Free Writing Prospectus filed February 13, 2026 with the SEC.

The rate exists for a documented reason. Strategy has published, more than once, that the policy intent is to “adjust the monthly regular dividend rate per annum in such manner as we believe is necessary with the objective, which may not be achieved, of $STRC trading at prices at or close to the stated amount of $100 per share.” When $STRC trades below par the rate climbs. When it trades above par the rate is cut. This is the price-stability mechanism, and it is the most-cited reason the bull case thinks the security is low-vol. It is also the most-cited reason the bear case thinks the security is a confidence trick. They are reading the same prose and disagreeing about whether it's load-bearing.

A few details that matter and tend not to survive the X format:

• $STRC sits junior to Strategy's senior debt, senior to STRK, STRD, and common equity, and is non-cumulative beyond a point — the rate is adjusted, not the obligation. In a true Strategy balance-sheet event, $STRC isn't where you want to be. It also isn't last in the queue.
• Strategy is funding the security via an at-the-market (ATM) offering of preferred shares, with proceeds used in part to acquire more bitcoin. The mechanism is therefore literally self-referential: $STRC issuance funds the BTC purchases that back the $STRC dividend. This is the part the bull case is enthusiastic about. It is also the part the bear case finds vertiginous.
• The dividend is taxed in the United States as a return of capital for now. Strategy notes in plain language that this treatment could change in any tax year. Don't price the security at its post-tax yield assuming the ROC treatment is permanent — it's a policy decision, not a contractual one.
• $STRC has nine months of trading history. The reference levels this piece works from — the same ones the tool's illustrative series is anchored on — are a 52-week range of roughly $90.50 to $100.40 and an all-time low of about $88.00, set on a single bad session early in its life. Treat them as approximate landmarks rather than tick data; pull the live series before you trade off them. We will come back to that $88 figure repeatedly.

That's the instrument. Now the trade.

Deploy fiat equity into an Interactive Brokers portfolio-margin account. Buy $STRC on 4× margin — for every $1 of your equity, the account holds $4 of $STRC. The position pays the $STRC dividend in cash monthly; IB charges margin interest on the borrowed $3. The net of those two flows is the carry. No bitcoin is pledged. No third-party loan is taken. Your spot stack, if you have one, is unencumbered.

This is the only version of the strategy we are going to discuss. There is a more aggressive variant — pledging spot BTC as collateral on a Ledn loan, using the loan proceeds to fund the IB equity, then running the same 4× carry on top — which has been circulated by other authors. We will not write up that variant because we will not publish the arithmetic of leveraging bitcoin into preferred-equity yield without first walking the reader through what happens when it breaks.

For the no-BTC-leverage variant, here are the worked numbers at the current state of the world.

Twenty-eight and a half cents on the dollar, paid in cash, monthly. Pre-tax. That is the number you've seen the bull case quote, with varying degrees of caveat. It is also a real number — we'd be lying to you if we pretended otherwise. It does in fact roll up to that figure at this set of inputs.

The buffer below spot is the part X struggles to surface. The static margin-call price at 4× leverage on these inputs is $88.23. The all-time low of $STRC is $88.00. That is twenty-three cents away.

This is the part of the math that doesn't appear in screenshot-quote threads, because it makes the trade look stupid. It is also the most important line in the spreadsheet.

The bull case correctly identifies that the price-stability mechanism has, so far, worked. $STRC has traded in a tight band around par. The dividend rate has been adjusted upward through the periods when the price drifted below par, presumably attracting yield-seeking inflows that pushed the price back toward $100. The ATM is doing what it was designed to do — and Strategy has so far not appeared to abuse the mechanism by, for example, dropping the rate sharply when the price approached par from above.

The bull case is also correct that the dividend is paid in cash from a real source. It is not a paper allocation. The cash arrives in the brokerage account at end of month. Anyone who has run the position can confirm this.

What the bull case lies to itself about is the structural property of the security. A variable rate set by the issuer's board, in the issuer's sole discretion, is not equivalent to a contractually fixed rate. Strategy can — and the prospectus is unambiguous that they retain the right to — cut the rate without warning, “at our sole and absolute discretion.” The “11.50% yield” the bull case quotes is a snapshot, not a constant. If you are pricing the trade as if the rate is constant, you are pricing a different instrument than the one you own.

Second, the bull case underweights path. The carry math we just walked through assumes you hold the position long enough for the dividend cash to accumulate. The path between today and that horizon is where the trade actually lives. $STRC printed its $88 low early in its first months, before the first monthly dividend payment had landed. A 4× position opened at the IPO would have had effectively no cash buffer at that moment. The static call line for a 4× position entered at $100 is $88.24 — above that low, not below it. The position, in that hypothetical, would have been liquidated.

We ran exactly this scenario in the VIP carry-trade tool. Be precise about what that is: an illustrative simulation over a synthetic price path calibrated to the reference levels above, not a backtest of realised prices. On that path, a 4× position opened at inception is liquidated inside its first month. The tool has since been moved onto live data, so what you see there today will not reproduce our figures — run it yourself against the real series rather than taking ours.

What doesn't depend on the path is the arithmetic of the liquidation itself. At 4×, by the time price reaches the 15% maintenance line, your equity has already fallen 47% — that is not a simulation output, it is what the maintenance line implies at that leverage. And you don't get to hold on and collect the dividend that was supposed to justify the borrowing. That is the whole fragility: one bad session, and the position advertised at 28.5% a year is closed out at roughly half the money you put in.

If your bull thesis can't survive that single example, your thesis has a hole.

The bear case correctly identifies that capital-stack seniority is what matters in a balance-sheet stress event. $STRC is junior to bonds. Strategy carries debt. The “backed by $4 of bitcoin per $1 of preferred” line that the bull case loves to quote is correct on the current balance sheet, but the balance sheet is not static. If Strategy's bond service ever became contested, $STRC holders would be subordinated to debt holders. The capital stack matters more than the bitcoin-to-preferred ratio at any given moment, because the stack is what allocates losses when those losses arrive.

The bear case is also correct that the security has nine months of trading history. There is no available backtest through a real bitcoin bear market, no available backtest through a Strategy balance-sheet stress event, no available backtest through a sustained period of $STRC trading above par where the dividend rate would be cut materially. The bear case's “we don't have enough data to know” position is not paranoia. It is correct.

What the bear case lies to itself about is the dollar value of the cash flow that has already arrived. $STRC has paid every monthly dividend it has declared, in cash, on the documented schedule. If you'd opened the trade after the first three months of payments had landed, the equity buffer in the position would have been materially different. The $88.23 call line for a position opened at the IPO is not the $88.23 call line for a position opened in March 2026 — the cash that has accumulated in the sweep account pushes the dynamic call line down. The bear case's preferred liquidation scenario gets harder to set up with each passing month the trade survives. That doesn't make the trade safe. It does make the bear case's “this is a confidence trick” framing increasingly difficult to defend on its own terms.

Second, the bear case has a tendency to argue from analogy to historical synthetic-yield products (cookie-cutter SPV income trusts; closed-end leveraged-income funds; the 2007-vintage “free money via callable swaps” plays). Some of those analogies are useful. Some are not. $STRC is not a closed-end fund. It is preferred equity issued by an operating company whose primary asset is bitcoin, with a documented rate-adjustment policy, listed on a major exchange. The risk shape is its own thing. Reasoning by analogy to instruments with different cash-flow mechanics is how the bear case ends up making confident predictions that don't survive contact with the next 8-K filing.

When does this trade survive? When does it fail?

It survives when:

• $STRC continues to trade close to par. The price-stability mechanism continues to work. The dividend rate is adjusted within a band that keeps the inflow attractive to yield-seekers.
• Strategy's balance sheet does not enter a stress event. The bond service stays current. The ATM continues to clear at par-ish prices.
• IB's portfolio-margin rules don't tighten materially. The 15% maintenance line at 4× leverage stays intact.
• The trader picked a leverage low enough that the static call line sits below realistic drawdown scenarios. We will return to this — it is the actionable lever the trader actually controls.

It fails when:

• $STRC trades below the static call line for the trader's chosen leverage. At 4× from a $100 entry, that line is $88.24 — above the $88 low this security has already printed, which means that configuration would have been liquidated rather than survived it. At 3×, the line is $78.43, some nine and a half dollars clear of that low. At 2×, it is $58.82. The leverage chosen at entry is the dominant variable.
• The dividend rate is cut materially. A reduction from 11.50% to 8.00% — entirely within Strategy's discretion, and arithmetically within the range of historical rate moves for variable-rate preferreds in other sectors — would drop the cash-on-cash from 28.5% to roughly 14.5% on the worked example. The trade survives; the marketing collapses.
• IB raises the margin rate. A 100 bp increase from 5.83% to 6.83% adds $30,000 per year of interest on the borrowed $3M, dropping the cash-on-cash from 28.5% to 25.5%. Still a return; not the headline you were sold.
• Strategy modifies the rate-adjustment policy. They've already publicly floated changes to the terms of $STRC in a May 2026 8-K. The document is on EDGAR; we link it from the tool. If the rate-stability mechanism is itself modified, the entire bull case is being re-priced in real time and you should know about it the same day.

Note what each of those failure modes has in common. None of them are under the trader's control. The single variable the trader actually controls is the leverage selected at entry. That is the lever.

Here is the math the tool produces, holding $STRC at par and all other inputs at the current state of the world, for a $100k equity position across the available leverage range.

These are struck at par, which is why the 4× line reads $88.24 here and $88.23 in the worked example above — that one is priced off the $99.99 last close. The 4× row is the headline number on every X thread, and it is the row that sits above the $88 low. The 3× row is what clears that low, with nine and a half dollars of breathing room. The 2× row is what survives a 41% drawdown without forced liquidation. The 1× row is what your accountant would call “owning a yield-bearing preferred stock.”

The trade-off is not subtle. Each step up the leverage column buys you about 2-3 percentage points of cash-on-cash and gives up about ten percentage points of buffer to the call line. That is the entire conversation. The bull case loves the 4× row. The bear case writes its threads about the 4× row. Almost nobody on X is publishing the 3× row, which is where the strategy actually starts to read as defensible on the available data.

A separate question worth asking, since this is situationroom: would you do better just holding bitcoin?

We ran the comparison in the tool. Both legs are simulated on the same synthetic window, not realised prices, so read them as magnitudes rather than results: naked spot BTC comes out around 19%, and the 3× $STRC carry — the version that clears the $88 low — comes out at a broadly similar level in cash, plus the underlying $STRC mark-to-market. The carry leg is the more predictable of the two, because 3× annualises to 22.84% by arithmetic; the BTC leg is whatever BTC happened to do.

The two land close enough together in this window that neither side gets to claim it. We won't dress that up as a win for the carry, and we won't dress it up as a win for bitcoin.

But the window is nine months long. Bitcoin over nine months is approximately a coin-flip. Bitcoin over a full cycle, or a half-cycle, or anywhere outside the specific window of this backtest, is not. Ryan Blair's own five-year arithmetic on the Ledn-loop variant of this strategy — the one that pledges BTC as collateral — comes to $8.98M of terminal wealth versus $12.55M for naked BTC over the same horizon. Even the originator of the more aggressive version of the strategy publishes numbers in which naked BTC wins. The no-BTC-leverage variant we walked through is a subset of that bet. It will win in some cycle phases. It will lose in others.

This is, we think, the part where situationroom diverges most cleanly from the rest of the X discourse. The honest answer to “should I do the carry trade?” is not “yes” or “no.” It is “do you want to be paid in dollars or in bitcoin?” The carry pays you in dollars. The dollars compound at 28.5% on 4× leverage — when it survives. Bitcoin pays you in bitcoin. The bitcoin compounds at whatever bitcoin does. There are years where one wins. There are years where the other does. Pretending the choice has a universal answer is what is wrong with X.

A few things this piece deliberately does not do:

It does not tell you whether to do the trade. We've built a tool. The tool runs the numbers on your inputs. You decide.

It does not tell you the rate will hold. We don't know. The board sets it. The board can change it. Our scraper at EDGAR will pick up the change, and the change is posted to the Ops Room chat within a day of any rate move. That's the most we can offer.

It does not tell you the $88.23 call line is a hard floor. It is, on the contrary, a soft line that drifts as cash accumulates. A position opened in May 2026 has a different effective call line than a position opened at IPO. The static number is a starting point, not an answer.

It does not tell you Strategy will or won't be solvent in five years. We have no special insight into the operating company beyond what's filed. The capital stack matters. Bond service matters. The bitcoin reserves matter. We can't price an opinion on any of those better than the bond market does, and the bond market is volatile.

The carry exists. The math is real. The risks are real. The question is whether you'd actually do this with money you can afford to lose.

That sentence sounds like a disclaimer. It isn't — it's the entire trade. The bull case is selling you the 28.5% number on money you cannot afford to lose, with leverage you cannot afford to lose, on a security whose rate-setting mechanism you cannot influence. The bear case is selling you doom on a position you've already decided not to take. Neither of those frames is helpful.

The frame that is helpful is the one our worked example forces: pick a leverage you can defend, run the backtest at that leverage against the actual realised price history of $STRC, look at the dynamic call line over the elapsed weeks of any position you'd open today, and decide whether the cash-on-cash number net of all costs is worth the path you'd have to walk to collect it.

Our 3× row says it might be. Our 4× row says it almost certainly isn't, at least not as a first position. Our 2× row says you'd be giving up most of the carry's allure for sleep at night.

The tool is at /tools/carry-trade for VIP members. You can open a paper position there in twenty seconds, watch the live $STRC price, see the dynamic call line move as cash accumulates, and decide whether the real-money version is something you'd actually do. That is what the receipts look like.