Buying Calls Caused Market Volatility

SoftBank Group Corp made significant option purchases during the run-up in the U.S. stock market in recent weeks as a way of temporarily investing some proceeds from asset sales, people familiar with the matter said on Friday.

The trades were revealed just as Wall Street’s runaway technology-led rally was faltering. The derivatives purchases could shed light on the Nasdaq and S&P 500 rise just two days ago to record highs, which seemed to put the coronavirus sell-off in the rearview mirror.

In August, SoftBank Chief Executive Masayoshi Son had announced a new investment management subsidiary that would park excess cash from a massive asset sale program in liquid stocks.

In total, SoftBank injected roughly $4 billion building up stakes in Amazon.com Inc, Netflix Inc, Tesla Inc, Microsoft Corp and Alphabet Inc , according to regulatory filings.

SoftBank bought a roughly equal amount of call options tied to the shares it bought, according to the Wall Street Journal. Investors typically pay premiums to buy call options, which give them access to a much higher amount of shares on paper.

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