https://www.usa-vision.com/softbank...gains-on-masayoshi-sons-us-stock-options-bet/
SoftBank sits on $4bn trading gains on Masayoshi Son’s US stock options bet
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SoftBank is sitting on trading gains of around $ 4 billion after founder Masayoshi Son made aggressive bets on equity derivatives that helped propel the US stock market to record highs, people said having direct knowledge of the subject.
the
high risk strategy has been built over the past few months, these people said, with the Japanese conglomerate spending around $ 4 billion on technology stock-focused options premiums during that time.
Aside from a sharp pullback in the stock markets at the end of last week, the huge derivative bet on some US stocks has worked so far, leaving SoftBank with sizable but unrealized profits. However, a continued decline in the United States
stock Exchange could eat away at SoftBank’s returns.
SoftBank’s bets were made on the instruction of Mr. Son, who lost $ 70 billion in the dotcom crash.
The strategy focused on options linked to individual US tech stocks. In total, he took a notional exposure of around $ 30 billion using call options – bets on rising stock prices that give the right to buy stocks at a predefined price on future dates. . Part of this position was offset by other contracts purchased as hedge.
The trades have been deeply controversial even within SoftBank, according to people familiar with the discussions. Critics of the strategy say the group is better able to seek returns from complex structured investments such as the one orchestrated
at Wirecard last year, which protected against losses even when the German company collapsed.
“It’s just a leveraged punt in the market,” said one person with first-hand knowledge of the trades. “The whole strategy is just a dynamic buy.”
SoftBank declined to comment.
Stock markets have sailed higher since SoftBank started buying these options, thanks to very low interest rates and in part also a growing boom in retail investment, especially in technology stocks such as You’re here.
The strategy focused on individual US stocks resulted in a smaller market than options linked to larger stock indices. The aggregate face value of calls traded on individual U.S. stocks has hit an all-time high in the past two weeks, averaging $ 335 billion per day, according to Goldman Sachs, more than triple the moving average between 2017 and 2019.
The investments are the latest twist in a strategic reversal by Mr Son since March, when global markets collapsed due to the impact of the coronavirus pandemic. SoftBank’s shares collapsed at the time, putting the company and Mr. Son, who borrowed huge sums against his shares in the company,
in severe distress.
Since then, SoftBank
moved to relax huge portions of its portfolio, selling stakes in Chinese e-commerce group Alibaba, T-Mobile US and its Japanese telecommunications businesses. The cash generated by these products was used to buy back shares and repay its heavy debt.
The divestitures helped push SoftBank’s shares to a 20-year high. But the cash raised was also used to launch a new betting strategy on publicly traded tech stocks, marking a break with Mr. Son’s previous focus of betting on private companies through the Vision Fund.
Additional reporting by Leo Lewis
