The unidentified investor took off around $718 million of notional value in bullish options spreads known as risk reversals in Facebook Inc, Netflix Inc and Adobe Inc, according to a Reuters analysis based on data from Susquehanna Financial Group. The investor partially closed a similar position in Saleforce.com Inc on Tuesday.
The trades were structured differently than positions widely attributed to SoftBank Group Corp, whose big bets on equity derivatives tied to tech firms came to light last week.
Thursday’s unwinds were partial, and the positions still have a notional value of around $1.66 billion, the analysis showed.
Still, investors following large institutional trades in tech-related names may view the moves as a bearish signal, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group.
“Investors have been watching this big bullish flurry of trades that happened earlier in August, looking for signs of it beginning to be closed,” he said. “It could have a negative impact on sentiment.”
Robust options activity from institutions like SoftBank and hordes of retail investors is widely believed to have contributed to last month’s big run-up in stocks, as well as a recent sell-off that the Nasdaq confirmed on Tuesday was a correction, commonly defined as a decline of 10% or more from an index’s high.
U.S. stocks closed lower after a choppy session on Thursday as heavyweight tech-related stocks resumed their decline following a sharp rebound the previous session.
Overall, demand for protective put options has risen among tech-related names. But frothiness still remains in call options, which are used to position for upside in stocks, for certain companies such as Apple Inc and Tesla Inc, said Arnim Holzer, macro and correlation defense strategist at EAB Investment Group.
Skew, a measure that gauges demand for puts in relation to calls, on Tesla options turned negative once again on Thursday, according to data from Trade Alert, reflecting surging demand for calls.
“There is a fair amount of call skew in some of those names,” Holzer said. “That gives us a sense that there can still be some downward pressure, relative to the S&P, in those very large-cap tech names.”
Most of the trades attributed to SoftBank, which are seen as bullish positions on tech-related names, remain in place. Some have been moved to higher strike prices in an apparent bet on a further rise in the underlying shares.
SoftBank declined to comment.
The trades attributed to SoftBank are call spreads - a combination of a put purchase and a put sale - several of which expire in November. By contrast, the bullish risk reversals partially unwound on Thursday involved the sale of a put and the purchase of a call and have a September expiration date. Reporting by April Joyner; Editing by Ira Iosebashvili and Richard Chang