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SoftBank reportedly purchased $4 Billion in options contract: Controlled $50 Billion of tech shares!

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SoftBank has reportedly purchased $4 billion in options contracts controlling $50 billion worth of tech shares. The company made these purchases during the run-up in the US stock market. Investors were speculating that massive option purchase will be done by the ‘Nasdaq whale’. The Nasdaq has reportedly fallen 5 per cent on Thursday and 2.5 per cent on Friday. A new investment management subsidiary was launched by the Chief Executive of SoftBank in August. The new investment management subsidiary would park excess cash from asset sales in liquid stocks. The financial position of SoftBank is not entirely clear yet.

As per the traders, the mystery whale is making high purchases of call options on tech stocks including Amazon, Facebook, Netflix and Microsoft. You will see an increase in the value of call options when the prices rise. However, when the prices tend to fall the puts rise. SoftBank has been building of stakes in Amazon.com Inc, Netflix Inc, Tesla Inc, Microsoft Corp and Google-parent Alphabet. The company has infused around 4 billion dollars by these stakes. The company also generated an exposure of around 50 billion dollars. SoftBank bought an equal amount of call options associated with the shares. The company has spent 10 billion dollars to buy the shares.

Because of the shares bought by Softbank, the technical companies’ shares are going up. Although, there are many different types of options due to which the shares of these companies are going up every now and then. SoftBank has also received $42 billion in cash from a string of recent asset divestments. The company is also investing proceeds gained from asset sales in the US stock market. The representatives of SoftBank have denied commenting on the issue. As per Michael Purves, founder and CEO of Tallbacken Capital, ‘If SoftBank was selling puts it a very dangerous strategy. The big questions are – the scale of what they were doing and are they selling puts to buy calls – because that’s when you get embedded leverage,’

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