Retail option traders could have also played part in SoftBank’s Nasdaq ‘whale’ bet

whale shark — Whale sharks can grow to a length of 40 feet.

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The Financial Times reported purchase of options by retail traders may have added to Nasdaq “whale” effect.
Last week it emerged SoftBank bought call options worth $4 billion adding to tech’s summer rally.
But the FT said data from Sundial Research shows retail traders have spent almost $40 billion on similar trades.
This means SoftBank may have contributed a smaller part of the tech rally.
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SoftBank was the “Nasdaq whale” that snapped up $4 billion worth of options tied to US stocks, it emerged last week, but retail traders also likely played a part.

The Financial Times reported Thursday retail traders have spent almost $40 billion on similar trades over the last four weeks, citing data from Sundial Capital Research.

Last week, the FT reported that Japanese conglomerate SoftBank snapped up $4 billion of tech options, exposing it to $30 billion of underlying assets.

SoftBank’s stint in options trading was massive for a firm that usually backing private companies such as WeWork and DoorDash, but research from Sundial suggests that SoftBank’s purchases constitute only a small part of the summer “boom and bust” in the tech sector.

“My take is that it’s less SoftBank [driving options markets] and more this collective activity of retail, momentum-oriented crowd,” Dean Curnutt, the chief executive of Macro Risk Advisors, told the FT. “The data doesn’t have a mark of a whale. It has the mark of lots of little, tiny whales that add up to one big one.”

A call option gives the holder the right to buy a stock at a specific strike price. Put options on the other hand allow holders to sell at a certain price.

While SoftBank’s $30 billion call exposure may seem like a mind boggling figure, Goldman Sachs said holdings of call options on US stocks have increased threefold in 2020.

Small call trades, in lots of 10 contracts or fewer, are becoming more popular.

Sundial’s CEO and president Jason Goepfert told the FT the amount spent on call options in lots of 10 contracts or fewer rose to $39.4 billion on a rolling basis.

Tech stocks have outperformed several other sectors in the last few months. Shares in Tesla and Apple, two of the world’s most valuable companies, have seen record-breaking rallies this year, which pushed the Nasdaq to an all-time peak on 2 September.

Last week, a sell-off in the tech sector, led predominantly by electric vehicle maker Tesla, stripped 10% off the Nasdaq in just three trading days, but the index is still showing a near-70% gain since touching one-year lows in March.

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