The phrase “don’t try this at home” was possibly made for times like this.
Bond king and Pacific Investment Management co-founder Bill Gross said he made $ 10 million short on GameStop GME,
stocks during the stock retail frenzy earlier this year, but not before the retired billionaire lost several million dollars.
He explained to Bloomberg Television in an interview Tuesday how that trade declined. “I arrived too early. I went in with options like a good Robin Hood trader, I guess … and I sold call options around the $ 150, $ 200 level, ”Gross said, adding that then the stock rose to $ 400.
“I managed to get over my insecurities and get back down in terms of dating,” Gross said. “I was in the hole for about $ 10 million, but I’m in the same amount on the 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 exercise price, which means that Gross would have been forced to buy the shares at a higher price than you sold it when the option was exercised.
Gross said he’s still back in GameStop shares and continues to sell call options at the $ 250- and $ 300-a-share level. If those stocks exceed those levels, the billionaire could find himself losing money again. “The volatility is very high and that promotes the ability to make some money,” he said.
In fact, GameStop stocks have been the target of short sellers this year, fighting in part against individual investors organized by the crowds of Reddit’s WallStreetBets. The drama has sparked an investigation in Congress, which continues Wednesday, into GameStop’s brief squeeze, AMC Entertainment AMC,
and other actions.
Read: GameStop Round 2? How an option buying frenzy is giving meme stocks another jolt
Shares of GameStop started the year at $ 18, rose to more than $ 300 at the end of January at the height of the frenzy, fell to $ 40 and, more recently, rose again to the $ 200 level. The shares have risen higher. 1,000% so far this year, but this week alone they have lost 21%.
Gross retired from his post-PIMCO job as a portfolio manager at Janus Henderson in 2019 and is now focused on managing his charitable foundation.
Once in charge of the world’s largest bond fund, Gross also told Bloomberg that he was betting against US Treasuries and said he expects inflation to not fall below 2% in the coming months. Instead, it is 3% or 4%. The yield of the 10-year Treasury bonds TMUBMUSD10Y,
have risen to levels not seen in more than a year as investors expect strong economic reopens in the US, fueled by vaccines.
Gross’s inflation call rings out with analysts saying that part of the inflationary surge that will take place this year would be due to so-called base effects, when the weaker months of inflation were phased out of the annual measures as time passed. , leading to mechanically higher price levels. .
This phenomenon would take effect during the next few months when the deflationary blow from last year’s coronavirus pandemic is removed from the annual inflation measures reported by the US Department of Labor.
Sunny Oh contributed to this report.