Merchants say the Softbank ‘whale’ could also be again as choices exercise spikes for Large Tech shares
Wall Street traders said that an unusual spike in call options on Thursday shows that Japan’s Softbank may once again be betting on large tech stocks, CNBC’s David Faber reports.
Multiple sources told Faber that there was $200 million spent on Thursday morning on call options for Netflix, Amazon, Facebook and Alphabet, with the investment bank being the most likely buyer.
“A number of sources in the derivative markets on major trading markets noting that significant call buying, and they all point to Softbank as being behind it,” Faber said on “Squawk on the Street.”
Reports by the Financial Times, Wall Street Journal and other outlets identified Softbank as the Nasdaq “whale” whose massive options activity led to a boom for major tech stocks in August. The news led to a sell-off in Softbank’s stock in early September as investors worried about the new strategy for the bank and its CEO Masayoshi Son.
Softbank has traditionally invested in the private markets through its Vision Fund, but appears to have shifted some of its focus to public equities after some high-profile moves soured, including its investment in WeWork.
Call options allow the traders who hold the options to buy a stock at a predetermined strike price, with the bet being that the stock price will rise above the strike price. Unusually large call buying can lead to other traders buying the stock to cover their positions, driving the market price higher.
August was a banner month for tech stocks, with the Nasdaq 100 rising by 11%. Some of the stocks that saw unusual options activity that month saw even bigger gains. Shares of Apple soared 21.4%, while Tesla’s stock ripped higher by 74%.
To be sure, sentiment for those two stocks may also have been helped by other factors, including stock splits that could have made them more attractive to some retail investors despite not changing the fundamentals of the companies.
The August surge for tech stocks deflated in September, as the Nasdaq Composite logged three straight negative weeks on its way to a 5.2% decline for the month.
The four stocks named in Faber’s report all rose on Thursday after the options activity occurred, but they fell on Friday morning amid a broader market decline.