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Capital Markets

SoftBank stirs the tech stock volatility pot

Aggressive buying of technology stock call options by SoftBank and others is distorting prices but also creating opportunities for more measured investors – along with trading revenue for banks.

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SoftBank has been at the forefront of a wave of call option purchases on US technology stocks that is distorting relations between derivatives instruments, as well as raising concern about a bubble in underlying equity prices.

The scale of the buying is questioned, with estimates ranging from $30 billion to $50 billion of notional call option purchases from SoftBank at a possible premium outlay of about $4 billion, while retail investors have also been active.

SoftBank declined to comment.

The impact of overall call option buying is undeniable, however.

Between the middle of August and early September there was a sharp rise in the price of call options on the technology-dominated Nasdaq index, as well as for key single stock options, while the price of put options remained virtually unchanged.

The


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