Looks like SoftBank bought $4 billion in options over the summer. Retail accounts purchase $34 billion per month in options so I'm not buying into the theory that SoftBank is to blame for this.

Keep in mind that 4 billion (likely Softbank invested more) means 100x in stocks. i.e. a 10 billion investment in call options 'generates' 1 trillion in extra market cap (because of dealers hedging). That is 1/3 of AMZN or 2x TSLA and so on at current (not March) valuations. Such concentrated volume CAN move big stocks and in turn indexes.

Even if the market let go a bit now - Softbank has literally cornered the market for so long - they still make a killing in the process.

This is totally incorrect. Individual options contracts are indeed written against 100x of the underlying asset but this has absolutely nothing to do with the relationship between the price (premium) paid per contract and that of the underlying share. To given an example, you could find a put option whose premium is actually equal to the current market value of the underlying (i.e. a merely 1 to 1 relationship) or one that's so far out of the money that it's a 1 to 1000 relationship. Without knowing more details about the precise options SoftBank bought, we cannot infer how much market cap in underlying shares the $4bil corresponds to.

The concept of notional value is more complicated than that. Dealers don’t hedge the full notional value they hedge only enough to cover the delta and gamma on the option.

True but at the current high implied volatility of the affected symbols the delta/ gamma has been high —> lots of hedging needed. Big loop.

Correct, but not 100:1 hedging.

In addition to that, they match orders in real-time, so they might not even need to hedge partially because they have offsetting positions coming in.

how are retail options different from softbanks options. if there are 34 b of retail calls purchased that would dwarf softbank if done in the same time period

I don't think the retail purchases were as concentrated.

If that’s true, that’s 34B in the total options market, this 4B is targeted at like 5 companies.

Retail buys that much total, not net. And retail mostly buys puts as a hedge to their existing position. SoftBank introduced $4b of premium directed in the same direction for new deltas.

source on retail investors? I also believe retail is having a larger effect, I just haven't seen this number before.

Hasn't Elon been complaining about short sellers for a long time? Shorts can do fucked up things to trade volumes when it comes time to pay up.

Every public company CEO complains about shorts. It's because short sellers depreciate the stock value by

a. creating more supply

b. signaling the stock price is overvalued.

Both of these things annoy those whose compensation is strongly tied to stock price performance.

> time to pay up.

I'm not sure what you mean by this. Are you talking about short squeezes?

Squeezing is what happens to short sellers who are wrong. I suppose "when they get squeezed" would have been more accurate, but I was failing to put that into words.

"wrong" is a very loaded word to use in this context and it's not clear what you mean.

Wirecard short sellers were "right" (as in their thesis was corect) for many years before the stock price reflected their beliefs. Some of them probably got squeezed (and quite a few got in trouble with various financial authorities).

It's either a bad bet or it isn't.

This encompasses both direction and duration, so getting one of them wrong, is still wrong.

I see the appeal in using the return as a way of judging the bet, but I think it's too simplistic.

Reason #1: In investing, you can do everything right and still lose money. This is because there is never certitude, and you can only play the odds.

So, if you make a bet with a 90% chance of winning, and yet you still lose, was that a bad bet?

Reason #2: Most people like to think stock prices reflect reality somehow and the mechanism through which that happens is people buying or selling stock to reach price equilibrium. So, in that sense, a good bet would be one that pushes the price towards reality.

TSLA calls have been ridiculous the last few months. Buy >50% OTM calls with expirations 1-2 months out and still make money. No wonder it looks like free money.

There were multiple instances where I bought absurdly OTM TSLA weekly calls (sometimes > +200% or as far as I could out) at open, and sold as soon as an hour later for profit.

Earlier this week, I bought Tesla $800C’s despite the stock trading in the 400’s and sold for 300% returns later that day. I’m not one to day trade, but when opportunities like this are on the table it’s hard to resist.

Yeah though if somebody bought a high leverage call on Tesla Thursday they might have lost it all in a day. The thing is it's hard to predict when the rally will end. You can only make predictions with some, or maybe increasing, level of certainty but it's still a bet.