Legendary “Bond King” Bill Gross has shocked the market by diving into the options trading frenzy surrounding Trump Media & Technology DJT stock.
Risky Move: Gross has taken a contrarian stance by selling options linked to former President Donald Trump’s recently listed media company stock. His confidence in this unconventional move was evident in his social media posts, where he emphasized the extreme volatility of these options.
“A true genius in the investment world is one who dares to sell DJT options at a staggering 250 annualized volatility.” Gross has notably put his money where his mouth is, engaging in selling puts and calls set to expire in April, with a belief that the stock will hold within the $45 to $95 range, as per a Bloomberg report.
The implied volatility of Trump Media’s at-the-money contracts, due to expire in a month, surged to an unprecedented 250 this week, marking a historical peak for the stock.
This surge in implied volatility has inflated the cost of options contracts, presenting an opportunity for sellers like Gross to rake in sizable premiums, albeit exposing them to substantial paper losses in the face of significant share price fluctuations.
Envision the Future: Is Trump Media’s worth surpassing that of Elon Musk’s X?
Trump Media’s ascent has been propelled by fervent supporters of the former president, who used social media as a catalyst to propel the company as it merged with Digital World Acquisition Corp., its publicly traded shell.
The surge propelled the stock to climb by as much as 275% year-to-date, considering DWAC’s prior price.
What’s At Stake: Trump Media’s stock has become a hotbed of speculative fervor in the market, attracting many who view it as a gambling den. The company, which made its market debut through a blank-check merger, boasts a valuation of approximately $9 billion, significantly outstripping its modest revenue from the Truth Social platform last year.
However, the gamble of betting against the stock comes at a steep price, with investors encountering annual borrowing costs ranging from 400% to 500%, making it the costliest company in the United States to wager against by a substantial margin.
Despite the meteoric rise of the stock, it has sparked debates regarding its valuation and the inherent risks of opposing it. An investor who once championed a ban on short-selling is now eyeing a move against Trump Media, deeming it the “most significant pump-and-dump stock in history.”
On the flip side, noted economist Peter Schiff has boldly forecasted the potential surge in Trump Media’s stock and its ramifications on Trump’s overall net worth.
Nevertheless, skeptics abound regarding the company’s valuation, with Tesla bull Ross Gerber voicing doubts about its prospects.
Insights from Jim Cramer: Analyzing the newly listed DJT from Trump – Love him or loathe him, recognition that this stock is overvalued is key.
Disclaimer: This content was authored in part using Benzinga Neuro and was reviewed and published by Benzinga editors.
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