(Bloomberg) -- SoftBank Group Corp. is sitting on trading gains of about $4 billion after founder Masayoshi Son made bets on equity derivatives, the Financial Times reported Sunday, citing people with direct knowledge of the matter.The Japanese company’s strategy has been built over the past few months, the FT cited the people as saying, adding that SoftBank has spent about $4 billion on options premiums focused on tech stocks over that time. SoftBank now has large but unrealized profits, and the trades have been deeply controversial even within SoftBank, the newspaper reported.The Japanese conglomerate said in August that it was starting a new unit to trade public securities, pushing beyond its traditional base in telecommunications and private startup investments. Bloomberg reported in August that SoftBank was targeting investments of more than $10 billion, perhaps tens of billions, and would use financing structures that would allow the company to avoid showing up in public disclosures of shareholding.The FT, Wall Street Journal and Zero Hedge then reported that SoftBank was making massive bets on technology stocks using equity derivatives. The FT labeled SoftBank the “Nasdaq whale” that “stoked the fevered rally in big tech stocks,” though it didn’t include details of any trading.SoftBank shares fell as much as 3.7% Monday in Tokyo trading. SoftBank declined to comment.The Wall Street Journal reported that SoftBank spent about $4 billion buying call options on stocks, while also selling call options at higher prices. The FT later also reported that SoftBank had spent about $4 billion on options with notional exposure of about $30 billion.The idea that options buyers could drive extreme rallies in technology stocks -- and push benchmark indexes to record highs -- would have drawn skepticism in the past. But as call volumes have exploded in stocks such as Apple Inc., Amazon.com Inc. and Tesla Inc., analysts are beginning to embrace the theory. They point out that traders could have outsize influence by concentrating their bets on a narrow set of high-profile names while other trading activity is reduced.“In a world where volumes are distorted by the frantic trading of algos, any real order flows may have surprisingly large impact on prices,” Peter Tchir, head of macro strategy at Academy Securities, wrote in a note Tuesday. “By trading options, they leverage their position.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
https://ift.tt/2Dzf1GP from Yahoo Finance https://ift.tt/358lx2N
September 07, 2020 at 06:12AM
Comments
Post a Comment