The phrase “do not try it at home” was made possible for such moments.
Bond King and co-founder of Pacific Investment Management, Bill Gross, said he earned $ 10 million for GameStop GME,
shares during the retail frenzy earlier this year, but not before the retired billionaire lost several million dollars.
He explained in an interview with Bloomberg Television on Tuesday how the trade had slowed down. “I came in too early. ‘I went in with options like a good Robin Hood trader, I think … and sold calls at about $ 150, $ 200,’ ‘Gross said. Then the stock rose to $ 400.
“I did manage to overcome my uncertainty and drive it all the way back in terms of climbing out,” Gross said. “I was about $ 10 million in the hole, but I’m about the same amount above ground.”
A call option is a financial instrument that gives the holder the right, but not the obligation, to buy an underlying security at a fixed price, known as the exchange price, which means Gross would have been obligated to hold the share at a higher price than he sold it when the option was exercised.
Gross said he still returned in GameStop shares and still sold call options at $ 250 and $ 300 per share. If the stock exceeds these levels, the billionaire could lose money again. “The volatility is very high and it enhances the ability to make money,” he said.
Indeed, GameStop shares have been the target for short sellers this year, partly facing individual investors organized by Reddit’s WallStreetBets crowd. The drama sparked an inquiry into Congress, which continues Wednesday, following the brief pressure from GameStop, AMC Entertainment AMC,
and other shares.
Read: GameStop Round 2? How an option-buying frenzy offers another shock to meme stocks
Shares of GameStop started the year at $ 18, rising to more than $ 300 at the height of the frenzy, falling to $ 40 and then climbing more back to the $ 200 level. % rose, but this week alone lost 21%.
Gross retired from Janus Henderson as portfolio manager at Janus Henderson in 2019 and now focuses on managing his charity.
After being in charge of the world’s largest bond fund, he also told Bloomberg that he was betting on US Treasury bonds, saying that he did not expect inflation to fall below 2% in the coming months, but that it will move more at 3% to 4%. The proceeds of 10-year Treasurys TMUBMUSD10Y,
has climbed to levels not seen for more than a year as investors expect strong economic reopening in the US, boosted by vaccines.
Gross inflation calls with analysts believing that part of the inflationary surge would take place this year would be due to the so-called base effects, as weaker months of inflation were phased out with the passage of annual measures, leading to mechanically higher price levels. .
This phenomenon will take effect over the next few months when the deflationary hit of the coronavirus pandemic last year is removed from the annual inflation measures reported by the U.S. Department of Labor.
Sunny Oh contributed to this report.