Crypto Engine is a crypto trading tool for investing in the crypto market with an %88 average win rate on trades and is the #1 trading software for crypto traders from all around the globe in 2022. Try it For FREE Today.
SoftBank Group Corp. is considering revamping a controversial strategy of using derivatives to invest in tech companies, and its executives have met with investors in recent days to assure them that the bets are relatively conservative, according to people familiar with the matter.
The Japanese conglomerate has stressed to investors that its billion-dollar positions have been concentrated in a handful of blue-chip tech companies, including Microsoft Corp. and Facebook Inc., and have involved call spreads rather than highly leveraged short-term bets, said the people, asking not to be identified because the matter is private.
SoftBank’s recent trading has focused on seven technology companies, one of the people said: Amazon.com Inc., Adobe Inc., Alphabet Inc., Netflix Inc. and Salesforce.com Inc., in addition to Microsoft and Facebook. It typically bought out-of-the-money call options to benefit if share prices rise and then sold even higher priced calls, one of the people said.
A spokesperson for SoftBank declined to comment.
The Tokyo-based company said in August that it would set up a new arm to trade public securities and later disclosed investments of about $3.9 billion in 25 companies. Bloomberg first reported that SoftBank was targeting investments of more than $10 billion in public stocks as part of a new asset management arm.
U.S. stock benchmarks declined after Bloomberg reported the SoftBank deliberations. The Nasdaq 100 tumbled more than 1%, hitting its session low as losses grew in mega-cap technology companies including Apple Inc. and Amazon.com Inc.
“It’s just one piece of the puzzle, but the market did seem to sell-off around the same time,” said Chris Murphy, Susquehanna International Group’s co-head of derivatives strategy. “Is it necessarily rational, for however much market cap of companies to go lower because of a decision made by one institutional trader? Probably not. But is the market looking for reasons to selloff in one direction or another? Probably. This is the most talked-about thing, so it’s definitely on everyone’s minds.”
Although he didn’t know SoftBank was behind the purchases until the recent disclosures, Eifert said the series of transactions look like each other and seem related. They have been primarily in call spreads and some calls with expiration dates between November 2020 and March 2021 in six or seven of the biggest names in technology.
“Most of the big trades that are associated with SoftBank, or accounts like SoftBank, were done delta-neutral,” he said. “These are institutions that are already long tech stocks and are rotating some of that exposure into options to protect the downside.”
Eifert estimated that the notional value of all the trading flow to be more than $50 billion with a few billion dollars spent on the premiums, or option cost. The purchases had far less impact on the bullish feedback loop driving tech stocks higher than did hordes of retail traders buying short-dated call options, he said.
Altcoin Directory is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Some of the content on this site (namely Branded Content Posts) is paid content that is not written by our authors and the views expressed do not reflect the views of this website. Any disputes you may have with brands or companies mentioned in our content will need to be taken care of directly with the specific brands and companies. The responsibility of our readers who may click links in our content and ultimately sign up for that product or service is their own. Cryptocurrencies, NFTs and Crypto Tokens are all a high-risk asset, investing in them can lead to losses. Readers should do their own research before taking any action.