Options investor makes big bets on Nasdaq's popular 'Fang' stocks
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Tech-related call buying has continued, but it has cooled since early September.
PHOTO: REUTERS
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NEW YORK (REUTERS) - An investor bought large blocks of upside call options on Thursday (Oct 1) in companies such as Netflix and Amazon.com, trades reminiscent of outsized options purchases made in August by a large investor known as the "Nasdaq whale."
The unknown investor purchased calls expiring in January and March for Netflix, Amazon, Facebook and Alphabet while selling shares of those companies, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group.
The four companies are collectively known among investors as the "Fang" group, for the first letters of Facebook, Amazon, Netflix and Alphabet's Google.
Such a trade involving options allows an investor to reduce stock exposure while maintaining the ability to benefit from future gains in stock prices.
In total, the investor paid a premium of about US$180 million (S$245.5 million) for the options, which have a notional value of roughly US$1.7 billion, according to data from Trade Alert.
Some market watchers have attributed similar large call purchases in tech-related names made in August to SoftBank Group. Those institutional trades came during a flurry of call buying driven by retail investors.
According to some analysts, that activity prompted September's tech-driven sell-off in US stocks, as dealers who sold those calls unwound the shares they had previously purchased to hedge against their short options positions.
"I can't tell you for sure who that is, but I have a feeling it's SoftBank again," said Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets, of Thursday's trades.
SoftBank declined to comment.
Tech-related call buying has continued, but it has cooled since early September. Skew, a measure of demand for protective put options relative to upside call options, has recovered in names such as Alphabet, Amazon and Apple.
The stock sales accompanying Thursday's options purchases neutralize the overall market impact of the trade, Mr Murphy said. Moreover, given the previous "Nasdaq whale" trades, they are unlikely to spur as much reaction from other investors, and the impact is likely to be confined to options markets, he said.
"Because they're buying a bunch of vol in big names, maybe it spurs more vol buying," Mr Murphy said. "But it's more likely to have vol impact than stock price impact."
