RV Blog The 4 Charts on My Radar

The 4 Charts on My Radar

Is Softbank really "The NASDAQ Whale?"

With the Nasdaq 100 closing down 4.77% today, the index has had the worst 3 day sell-off since March:

Real Vision Blog - Chart: Nasdaq 3 day sell-off biggest since March
Source: Bloomberg

The sell-off occurred as call option volumes have been skyrocketing:

Real Vision Blog - Chart: Individual Names
Source: Mike Green and Wayne Himelsein

Many have connected the increased option activity with the “spot-up, vol-up” phenomenon in late August, as well as with the ferocity of the market sell-off. The logic goes something like this: dealers who write (i.e. “sell”) the call option are exposed to the underlying price change, so to hedge this “delta,” they buy stocks on the way up. It was assumed that it was retail flows, from the “Robinhood crowd,” that were forcing the market up by buying these call options in droves.

However, on Friday, the FT dropped “the bombshell”: Softbank had been buying billions of dollars worth of calls. Case closed, right?

Well, not so fast. This chart from SentimenTrader (by way of Benn Eifert) suggests otherwise, showing that $40 billion of these option orders over the past month have come in order sizes of 50 contracts or fewer.

Real Vision Blog - Chart: Contract Orders greater than 50 - not softbank
Source: SentimenTrader

In other words, it is still retail flows who are behind the wheel.

Lastly, the ultimate question is “is this 2000 all over again?” has yet to be answered. But I found this chart to be thought-provoking:

For more on the connection between derivatives and the ongoing market turmoil, check out today’s Real Vision Daily Briefing.

For Real Vision’s previous coverage of volatility rising with stocks in late August, click here.

RELATED CATEGORIES: Daily Briefing, Market Analysis


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