Behind Goldman Sachs $100 Million And Softbank’s $4 Billion Tesla Inc. (NASDAQ:TSLA) Gains

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Tesla Inc. (NASDAQ:TSLA) is a stock that has kept on giving, a trend that has seen it outperform the overall stock market. A spike to record highs above $2,000 a share propelled co-founder and CEO, Elon Musk, to the third richest person in the world with a net worth of more than $110 billion. Similarly, institutions and retail investors have also generated a fortune on the stock skyrocketing. Goldman Sachs is one of the institutional investors that have reaped big on the EV giant’s impressive performance in 2020.

Goldman $100 Million Gain

While most traders profited on buying the stock and riding the move upward, institutional traders appear to have resorted to euphoric call buying strategies that helped propel the stock even higher. Goldman Sachs is believed to have made as much as $100 million trading Tesla stock using stock options and providing financing secured by Tesla shares.

The investment bank is also believed to have invested in the EV giant convertible bonds by buying and selling. While Goldman Sachs does not deal with retail investors directly, the returns it made on Tesla stock indicate how the bank traders managed to profit from leveraging extraordinary strategies that generated profits from extraordinary market moves.

Softbank is another institutional investor that profited a great deal on leveraging Tesla call options. The firm has come under scrutiny in recent weeks, having emerged it netted in the upwards of $4 billion  on buying OTM call spreads of high bet stocks such as Tesla.

It has since emerged that Goldman Sachs and Softbank’s action played a big role in driving the buying spree in most tech stocks. The tech-laden NASDAQ powered to record highs as a good number of tech heavyweights led by Amazon and Tesla exploded.

Market Correction

For instance, a single stock option volume exploded three times in the second-quarter attributed to a strong buying spree compared to the same period last year. Tesla option volume recorded a new all-time high of $1.45 trillion in July, up more than 10X from $124 billion reported in July of last year. Amazon, another tech heavyweight, saw its option volume hit $1.48 billion in July compared to just $632 billion reported last year.

The fact that a spike in option volumes came at a time when equity markets are synonymous with low volumes all but continues to fuel suggestions of potential equity manipulation via the options market. The upward momentum has since cooled off.

Tesla has come under immense pressure in recent weeks after completing a stock split that sought to make the stock affordable for the masses. Amazon has also pulled lower significantly and at risk of plunging below the $3,000 level as a sell-off of the broader stock market continues to gather pace.

The sell-off comes amid growing uncertainty in the markets fuelled by uncertainties across the board. The U.S heading into a hotly contested election is one factor that continues to fuel fear in the stock market. A pandemic that refuses to go away is another development that has kept investors on edge about taking more risk in the market.


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