Is the erstwhile “Bond King” becoming the options king?
Bill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.
In a critique of the latest trading flurry, in which GameStop has soared 179% in two days while AMC has jumped 135%, Gross posted on X that “Gamestonk” is passe. “Buy? Sell? Not me,” he wrote on the social media platform Tuesday.
His strategy centers on selling what he describes as “400% annualized volatility.”
The trade was to sell GameStop $40 calls and puts — known as a straddle — betting that the stock won’t swing too far in either direction. He collected $22 for the combination of options, allowing him to profit if the stock is between $18 and $62 at the close Friday, standing to gain the most if shares end up near $40. He’s used a similar strategy on AMC, selling $10 straddles.
GameStop shares closed at closed at $48.75 after soaring as high as $64.83, while AMC ended the session at $6.85 after opening at $11.88.
The trade comes about seven weeks after Gross sold options underlying former president Donald Trump’s media firm. At the time, Gross was betting that Trump Media & Technology Group Corp. would stay between $45 and $95. Shares dropped as low as $22.55 a few weeks later before staging a rally to $53.40 as of Tuesday’s close. Gross said he’s out of that position.
The latest mania has spread to many of Wall Street’s most hated stocks, reminiscent of 2021’s meme stock craze, when individual investors railed against short-sellers on forums like Reddit Inc.’s WallStreetBets and the chatroom StockTwits. The surge caught the attention of a smattering of social-media personalties including Barstool Sports founder Dave Portnoy who piled into the stocks.
Even with the rallies, however, GameStop’s stock remains roughly 60% below its intraday peak while some AMC investors are sitting on paper losses greater than 98%. The recent gains have burned short sellers, with mark-to-market losses on the two stocks topping $1 billion this month, according to financial analytics firm S3 Partners.
This article was provided by Bloomberg News.