(Reuters) – SoftBank Group Corp (T:) is considering changing its strategy of using derivatives to invest in tech stocks, Bloomberg News reported citing people familiar with the matter.
The report https://www.bloomberg.com/news/articles/2020-09-11/softbank-reconsiders-options-trading-strategy-that-hurt-shares?sref=y3YMCJ4e said SoftBank executives had met investors in recent days to assure them that the bets are “relatively conservative”.
SoftBank has told investors that its positions have been concentrated in a few blue-chip tech companies, including Microsoft Corp (O:) and Facebook Inc (O:), and have involved call spreads rather than highly leveraged short-term bets, according to the report.
The group has made significant option purchases during the run-up in the U.S. stock market in recent weeks as a way of temporarily investing some proceeds from asset sales, people familiar with the matter told Reuters https://in.reuters.com/article/us-usa-stocks-softbank-group/softbank-option-purchases-raise-eyebrows-as-wall-street-backtracks-idUSKBN25V2DZ last week.
Robust options activity from institutions like SoftBank and hordes of retail investors is widely believed to have contributed to last month’s big run-up in stocks, as well as a recent sell-off.
Call options gain in value when prices rise, while puts rise when prices fall.
Buying options can be a cheaper way of investing in an underlying security than direct purchases; but selling uncovered options can be extremely risky.
SoftBank, which has a history of making opaque trades through derivatives, did not immediately respond to a Reuters request for comment.
SoftBank has debated internally about disclosing more details of its derivatives trading, but founder Masayoshi Son, has been reluctant to provide more information, the Bloomberg report said.
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