SoftBank’s options exit unlikely to stir markets, analysts say

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In this news, we discuss the SoftBank’s options exit unlikely to stir markets, analysts say.

(Reuters) – The massive options bets reportedly placed by SoftBank Group Corp earlier this year were among the most visible manifestations of the recent tech stocks craze, but the company’s unwinding of its derivative holdings is unlikely cause a lot of market turmoil, analysts said.

The large option purchases awarded to the Japanese company have led to it being dubbed “the whale of the Nasdaq” in some media reports. But now SoftBank will move away from derivatives trading following a backlash from its investors, Bloomberg News reported on Wednesday, citing unidentified sources.

About 90 percent of the options, which accompanied SoftBank in moving some of its cash reserves to listed tech stocks, will close by the end of December, Bloomberg said. (bloom.bg/2JBIuT6)

A spokeswoman for SoftBank declined to comment on the Bloomberg report.

Option trades were a way to temporarily invest part of the proceeds from asset sales, people familiar with the matter told Reuters in September. SoftBank declined to comment on the matter.

While it is difficult to assess the exact impact of SoftBank’s options trades on the market, its large bullish calls call buys on the stocks of companies such as Amazon.com Inc, Netflix Inc, Tesla Inc and Microsoft Corp, among others, helped fuel investor sentiment around an outbreak in which the S&P 500 Information Technology the sector rebounded 80% between late March and early September.

Yet few believe that SoftBank’s unwinding of its options strategies would leave a major mark on the stock markets, where the tech stock craze has cooled in recent weeks as breakthroughs in a COVID-vaccine. 19 fuel hopes for a broader economic recovery.

“While the launch of these deals had a noticeable impact on investor sentiment over the summer, the deal closing was much less impactful,” said Chris Murphy of Susquehanna International Group. “Investors have too many other things to focus on, from vaccine progress to the outcome of the US election.”

A significant portion of the tech stock rally of the year was driven by retail investors, who joined with longtime institutional players to help drive up overall trading volumes. The total volume of cleared listed options contracts was 674 million in November, up 72% from a year ago, according to data from the derivatives clearing organization, OCC.

“Retail traders are a much larger part of the whole. SoftBank is just one part of it, ”said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, TX.

CEO Masayoshi Son last month described derivatives as a “rounding error” compared to the group’s larger portfolio.

The fair value of SoftBank’s options and futures positions was $ 2.7 billion at the end of September, compared to $ 16.8 billion for technology stocks such as Amazon.com.

“The market is much bigger than SoftBank,” said Art Hogan, chief market strategist at National Securities in New York City. Nonetheless, he said the Japanese company’s pullback could weigh on investor sentiment in the sector.

SoftBank shares have risen about 53% this year.

Reporting by Saqib Iqbal Ahmed in New York, Susan Mathew and Aakriti Bhalla in Bengaluru and Sam Nussey in Tokyo; Editing by Bernadette Baum and Matthew Lewis

Original © Thomson Reuters

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