SoftBank Revealed as Massive Tech Options Buyer Fueling Market Frenzy
SoftBank reportedly acts as the mysterious "Nasdaq whale" by purchasing billions of dollars in big tech call options. This massive derivatives strategy drives extraordinary trading volumes before the market experiences a sharp reversal.
SoftBank emerges as the mysterious "Nasdaq whale" that buys billions of dollars in big tech stock options, driving up market volumes and fueling a massive trading frenzy. The Japanese investment firm, normally known for its private technology start-up investments through its $100 billion Vision Fund, declines to comment on the Financial Times report that exposes this new derivatives strategy. Market rumors previously circulate about large players causing extreme activity in out-of-the-money call options for major internet and technology companies.
Regulatory filings show SoftBank buys nearly $4 billion in shares of Amazon, Microsoft, Netflix, and Tesla, while spending roughly another $4 billion on associated call options. The firm targets tech giants that act as proxies for the broader stock market, as companies like Apple, Amazon, Microsoft, Facebook, and Google account for about a quarter of the S&P 500. By purchasing these derivatives, SoftBank profits from the subsequent run-up in stock prices and unloads its positions to other parties.
This unprecedented options market activity adds significant froth to the stock market before the trend sharply reverses. Following an 83% rally from its March low, the Nasdaq drops 5% on Thursday and falls an additional 2.5% on Friday. Analysts and investors express concern over this speculative approach, with one chief investment officer comparing the strategy to a casino trip rather than a long-term investment horizon.