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The phrase “don’t try this at home” may have been used for times like this.
King of bonds and Pacific Investment Management co-founder Bill Gross said he made $ 10 million in shorting, video game retailer GameStop, GME,
stock during the retail frenzy for stocks earlier this year, but not before the retired billionaire has lost several million dollars.
He told Bloomberg Television in an interview on Tuesday how that trade has gone down. “I arrived too early. I walked in with options like a good trader Robin Hood I guess … and sold calls at around $ 150, $ 200, ”said Gross, who added that the shares then went up to $ 400. .
“I managed to get over my insecurities and come down completely in terms of exit,” Gross said. “I was in the hole of about $ 10 million, but I’m about the same amount above ground.”
A call option is a financial instrument that gives its holder the right, but not the obligation to buy an underlying security at a fixed price, called a strike price, which means Gross would have been obligated to ‘buy the stock at a higher price than he sold it when the option was exercised.
Gross said he has always been in GameStop shares and is still writing call options at the $ 250 and $ 300 per share level. If these shares exceed these levels, the billionaire could lose money again. “The volatility is extremely high and that promotes an ability to make money,” he said.
Indeed, GameStop stocks have been the target of short sellers this year, battling in part against individual investors organized by Reddit’s WallStreetBets mobs. The drama sparked a congressional inquiry, which continues Wednesday, on short press from GameStop, AMC Entertainment AMC,
and other actions.
Read: GameStop Round 2? How an option buying frenzy provides another shake to stocks meme
GameStop shares started the year at $ 18, jumped to over $ 300 in late January at the height of the frenzy, fell to $ 40, and then climbed back to the $ 200 level more recently. Stocks are up over 1,000% year-to-date, but this week alone they are down 21%.
Gross retired from his post-PIMCO position as Portfolio Manager at Janus Henderson in 2019 and is now focused on running his charitable foundation.
Once in charge of the world’s largest bond fund, Gross also told Bloomberg he was betting against US Treasuries, saying he expected inflation not to drop below 2%. in the coming months, but is more between 3% and 4%. The yield on 10-year treasury bills TMUBMUSD10Y,
have climbed to levels not seen in more than a year as investors expect strong economic reopenings in the United States, boosted by vaccines.
Gross’s inflation call chimes with analysts saying that part of the inflationary surge expected to take place this year is believed to be due to so-called base effects, when the lower inflation months were gradually phased out from the annual measurements over time, leading to mechanically higher price levels.
This phenomenon would take effect over the next few months when the deflationary blow from the coronavirus pandemic last year is removed from the annual inflation measures reported by the US Department of Labor.
Sunny Oh contributed to this report.
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