Trading Insights
Revealed: The Smart Money Behind Tech’s Big Run
For weeks and weeks, we noted unusual options activity in large tech stocks that drove the market to all-time highs. Apple. Tesla. Alphabet. Microsoft. AMD. Salesforce. Across the board, there was big buying out there. We didn’t know who it was. And, to be honest, we didn’t really care because we knew something more important: […]
For weeks and weeks, we noted unusual options activity in large tech stocks that drove the market to all-time highs. Apple. Tesla. Alphabet. Microsoft. AMD. Salesforce. Across the board, there was big buying out there. We didn’t know who it was. And, to be honest, we didn’t really care because we knew something more important: what they were doing. But over the long weekend, the Financial Times solved the mystery with a story about large SoftBank option trades.
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SoftBank is a $100 billion Japanese fund that typically invests in private companies. But instead of private markets, the firm reportedly has taken large stakes in U.S. large-cap tech companies through billions of dollars in option trades. When someone of that size comes into the market, they will create waves.
Even without knowing who they were, focusing on unusual options activity gave us insight on the money driving stocks to all-time highs and why that trend was poised to continue.
How Big Were SoftBank Option Trades
From the Financial Times:
SoftBank’s high-risk strategy has been built up over the past few months, according to people with direct knowledge of the matter, during which time the group spent about $4bn on options premiums focused on individual US tech stocks.
In total, it has taken on notional exposure of about $30bn using call options — bets on rising stock prices that provide the right to buy stocks at a preset price on future dates. Some of this position has been offset by other contracts bought as hedges.
Ripples from SoftBank Unusual Options Activity
The SoftBank option trades are exactly the type of activity that we look for in our Unusual Option Activity services. When sophisticated, smart money investors make these trades, they leave ripples that we can follow.
In fact, as SoftBank built its positions in June and July, we flagged a number of large tech bets as unusual options activity. With the benefit of hindsight and just giving a quick glance into the archives, we found these trades that have SoftBank written all over them:
- Alert July 13: Traders bought Apple Sept $420 calls for $13.14 to $13.40. This amounted to a more than $154 million notional bet. Those calls traded on August 20 for $57.
- Alert July 24: Traders bought Advanced Micro Devices Sept $70 calls for $4.14. This amounted to a $46 million notional bet. Those calls closed on September 4 at $13.
- Alert June 22: Traders bought Salesforce Sept $200 calls for $9.30 to $9.70. This amounted to a $70 million notional bet. After Q2 earnings, those calls traded for $78.
- Alert June 8: Traders bought Etsy Sept $85 calls for $6.32. This amounted to a $17 million notional bet. Those calls closed on September 4 near $30.
And so on and so on.