We’re All SoftBank. We’re All Masayoshi Son. We’re All Robinhood.
The market did not appear to be amused with the idea of Masayoshi Son, gunslinging riverboat gambler.
Investors on Monday delivered their verdict vis-à-vis Son's multi-billion dollar speculative bet on further gains in high-flying US tech stocks, pushing shares of SoftBank more than 7% lower to start the week.
News that the Japanese conglomerate spent billions buying calls on mega-cap US tech names won SoftBank the somewhat dubious title of "Nasdaq whale" Friday, fanning concerns that Son "is
“in which the world only turns because Apple, Amazon, Google, Facebook, and Microsoft, say it does.”
Ben Franklin would be so proud of us. The lightning rod and battery have come a long way.
Post Industrial, Financializations apogee presently,we need some future and this is the Choo-Choo leaving the station. Hopefully the engine is strong enough to pull all the cars,3rd class included, up the hill.
Let’s define a possible future irony: say NDX rallies 30% above the recent highs. Son’s payoff ratio is 7x vs the premium spent. Then he goes from goat to visionary once again as he turns $4bn, into $28bn.
“Because each and every day, we wake up and gamble a piece of ourselves on the assumed viability of a reality in which the world only turns because Apple, Amazon, Google, Facebook, and Microsoft, say it does.”
Exactly. And every day we all make tacit decisions that each and every one of our holdings represents the optimal choice we can make with the funds we have invested. Else we should sell those holdings and buy the better choice. A hold is an investment decision.
Lol, or the rally falters and he bleeds theta until the options expire worthless. Can’t even imagine the theta decay on a multi-billion option portfolio.
But that’s a simplistic view. I imagine he’d be (at least partially) delta hedged, employing a ton of spreads to limit the theta bleed, and rolling 6m or 1y. That’d minimize theta and he can just keep banking on gamma/Vega as price moves and vol spikes. I mean, if you have billions of dollars to play with options, going purely long calls is pretty fkn stupid.
“assumed viability of a reality”… well put.
There is a real reality underpinning the world of FAAMG.
Perhaps somebody can explain something to me (I’m somewhat new at wading into the deep end of the pool here re options). I read that “somebody” bought 90,000 AAPL 125 c 9/11 on Friday. I can’t look it up right now, but let’s assume the delta on those calls is 0.1. Doesn’t that mean the market maker would have to buy 900,000 shares of AAPL to hedge? (Which of course drives up the price). And if my understanding is correct, here’s my question: why did the market maker sell those calls? I mean, obviously, to make money – but doesn’t that make the market maker a “gunslinging riverboat gambler” too? Excuse me if I’ve misunderstood any of this…
The market maker is like the casino owner, the odds are a little in his favour. If he gets his hedging and his math right, he slowly comes out ahead.
The delta is closer to 0.5.
In any case, if it were 0.1, as the call seller you would need to buy 9,000, not 90,000, shares. But as the price rises, delta increases, and the call seller would have to buy more shares.
Actually, 90,000 contracts represent 9,000,000 (not 900,000) shares. If exercised that would equate to a greater than $1 billion transaction.
I checked September 11 Apple calls contracts and for the $125 strike price open interest as of Friday’s close stands at 26,568. Conversely, volume as of the close on Friday stood in excess of 90,000 contracts (at 92,871). Perhaps that is what you read.
As a footnote, an overwhelming majority of call options contracts are settled (or rolled forward) as opposed to exercised.
All this fancy talk has skipped by the answer I believe that is called for. The guy short to offset the purchase is ALSO a riverboat gambler. The whole market is priced into that position. All the other answers are basically why the cover writer can have better odds. This market is very risky as soon as you step in.
well the hedger is simply hedging, if the stock goes down in price he keeps the premium. the hedger is simply using some of the premium to hedge and it is the owner of the option who take the risk and is slinging
Thanks John, yes that’s the answer I was looking for – or, as H put it – “We are all Robinhood.” And, if as Manuel said above, the delta is actually 0.5, that’s yikes – that’s 4.5 million shares needed to hedge. Which is fine, unless Apple tanks this week, leaving the MM with the premium paid but holding the bag (of course he hopes AAPL closes Friday at 124.99). But as Tom said, maybe I’m mistaken – I thought I heard there was a single buyer of 90,000 calls. Anyway, thanks everybody for your thoughts. Anyway, I’m keeping my head down – seems like this market is skating on thin ice, and November – January looks like it will be a shitshow of biblical proportions.
Retail $40bn in a month, $500bn notional (probably not delta neutral and at rich vols). Not a long term winning investment strategy.
But with indexers and closet indexers that don’t sell it can (and did) in the short run.
The excess is amazing. I suspect there are going to be some good opportunities in the not too distant future.
The casino is rocking and the house (dealers) win in the long run. Crazy vol out there (implieds).