Nasdaq Whale Emerges as Facebook, Amazon See Option Trades

(Bloomberg) -- Tens of millions of dollars in options trades tied to the biggest American technology companies have again surfaced in U.S. markets, weeks after the Japanese conglomerate SoftBank Group Corp. was linked to similar wagers.

Amazon.com Inc., Facebook Inc. and Netflix Inc. were among companies that saw block trades of call contracts Thursday, representing speculation on movements in their shares through the first months of next year. Call options are bullish bets by themselves but can also be paired with other positions as part of a hedge.

The identity of the buyer wasn't known. Analysts noted a resemblance to a series of wagers made by SoftBank over the summer, which entailed billions of dollars of call purchases in tech stocks. Those “Nasdaq whale” wagers -- combined with an explosion in buying by individuals and day traders in short-dated options -- were theorized by some analysts to have created a bullish feedback loop that contributed to the August rally in the Nasdaq 100.

“The structure of the trades combined with the timing certainly has a lot of investors speculating the Nasdaq whale is back in the marketplace today,” said Chris Murphy, derivatives strategist at Susquehanna Financial Group LLP.

A SoftBank spokesman didn't immediately respond to a request for comment.

The latest trades come amid another blistering stretch for technology stocks. The Nasdaq 100 climbed 1.5% Thursday, and has risen in seven of the last nine sessions, rallying almost 6% over the span after falling into a correction earlier in September. The gauge is up 33% in 2020, an annual return that would rank among the five best of the last two decades. Futures on the Nasdaq 100 fell 0.1% as of 8:30 p.m. in New York.

That software and internet stocks would surge so far in the year of a worldwide pandemic and attendant global recession has sent some analysts searching for alternative explanations for the gains. Some speculated that frenzied options buying by institutions and individuals -- as well as follow-on buying by big funds after SoftBank's positions came to light -- whipped up momentum by forcing dealers to purchase stocks as hedges. An onslaught of day trading by newly minted stay-at-home speculators has pushed options volume in some stocks to the highest in decades.

SoftBank considered revamping its trading strategy after the derivatives bets were said to have spooked some of its investors, people familiar with the matter told Bloomberg last month.

On Thursday, a combined $74.5 million worth of Amazon call options expiring in January and March changed hands, divided between two block trades. Almost $52 million worth of bullish Facebook options expiring in the same months traded in two transactions. Roughly $25 million was spent on similarly dated Netflix calls in two blocks, while $28.4 million worth of Alphabet Inc. bullish bets crossed in two trades.

“The pattern of these trades are very similar to that of those widely discussed in August, including the companies targeted, the sizes and maturities, and the delta neutral execution,” said Benn Eifert, chief investment officer of the hedge fund QVR Advisors.

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