(Bloomberg) — Trading options tied to former president Donald Trump’s media company is attracting meme-stock traders and Wall Street professionals. Add to that list erstwhile “Bond King” Bill Gross.
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The eye-popping costs to flip derivatives betting on Trump Media & Technology Group Corp. given expectations for more wild swings was called out by Gross in a post on X.
“A genius might be an investor with the courage to sell DJT options at a 250 annualized volatility,” he wrote on the social media platform Thursday morning.
Gross likes the thought loads, he’s trading it himself. The legendary investor told Bloomberg he has sold puts and calls that expire in April, respectively betting shares will stay between $45 and $95.
This week, implied volatility of Trump Media’s at-the-money contracts expiring in a single month hit 250, a high for the stock, since the shares soared roughly 78% from Friday. With that key gauge at such a lofty level, the outright cost of options contracts can be sky high, offering sellers of puts and calls the prospect to reap large premiums — while also risking sharp paper losses should the shares have wide swings.
Read more: Donald Trump Is Richer Than Ever — Yet Still Strapped For Money (1)
Trump Media has change into essentially the most recent way for speculators to utilize the stock market as a casino, raising memories of 2021’s meme stock mania. The company, which went public through a blank-check merger, has a roughly $9 billion valuation, far outstripping the modest revenue its Truth Social platform helped herald last yr.
The stock’s surge has investors desirous to get in on the motion, using the whole thing from call and put options, to costly short bets, to gambling on warrants tied to the company.
For those brave enough to outright bet against the stock, the price is stratospheric. Investors are facing annual financing costs of 400% to 500% to borrow, in step with brokerages. That makes it the costliest US company to bet against with over $100 million of short interest by an enormous margin, S3 data show.
A small pool of shares available to trade paired with Trump’s loyal following of retail investors has made the stock particularly volatile. Finding shares to borrow for firms that went public through a deal with a special-purpose acquisition company typically is tough because long-oriented shareholders like mutual funds and ETF providers — the usual sources for shares available for lending — rarely have large SPAC positions.
Investors looking for to bet against difficult-to-short stocks may buy put options as an alternative. Options trading has been very energetic in each directions. Calls expiring at the highest of this week were the popular as traders chased the rally, while puts that may make money if shares close below $60 or $65 were also heavily traded.
Trump Media was trading at around $64 Thursday morning.
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