The phrase “don’t try to do this at home” was possibly made for times like this.
Bond king and Pacific Investment Management co-founder Bill Gross said he earned $ 10 million by selling GameStop GME,
stocks during the retail frenzy for stocks earlier this year, but not before the retired billionaire lost several million dollars.
He explained to Bloomberg Television in an interview on Tuesday how that trade fell. “I arrived very early. I came in with options like a good Robin Hood broker, I think … and sold call options at around the $ 150, $ 200 level, ”said Gross, who added that the stock then went up to $ 400.
“I was able to overcome my insecurities and step back in terms of leaving,” said Gross. “I was losing by about $ 10 million, but I have the same amount above 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 defined price, known as the strike price, which means that Bruto would have been required to buy the shares at a price superior he sold it when the option was exercised.
Gross said he is still back in GameStop’s stock and is still selling $ 250 and $ 300 call options. If these shares exceed those levels, the billionaire could lose money again. “The volatility is super high and it promotes the ability to earn some money,” he said.
In fact, GameStop’s shares have been the target of short sellers this year, struggling in part with individual investors organized by the crowds of Reddit’s WallStreetBets. The drama sparked an investigation into Congress, which continues on Wednesday, about GameStop’s short tightening, AMC Entertainment AMC,
and other actions.
Reading: GameStop Round 2? How an option buying frenzy is providing another shock to meme stocks
GameStop shares started the year at $ 18, rose to over $ 300 at the end of January at the height of the frenzy, dropped to $ 40 and, more recently, rose to the $ 200 level. shares rose more than 1,000% in the year, but this week alone lost 21%.
Gross retired from his post-PIMCO job as a portfolio manager at Janus Henderson in 2019 and now focuses on managing his charitable foundation.
Once in charge of the largest bond fund in the world, Gross also told Bloomberg that he was betting against US Treasury bonds, saying he expects inflation not to drop below 2% in the coming months, but to stay between 3% and 4 %. The yield on 10-year Treasures TMUBMUSD10Y,
have risen to levels not seen in more than a year, as investors expect strong economic reopens in the United States, driven by vaccines.
Gross’s appeal for inflation resonates with analysts who say that part of the inflationary increase expected to occur this year would be due to so-called base effects, when weaker months of inflation have been eliminated from annual measures over time, leading to levels of inflation. mechanically higher prices.
This phenomenon would take effect in the coming months, when the deflationary impact of the coronavirus pandemic last year is removed from the annual inflation measures reported by the United States Department of Labor.
Sunny Oh contributed to this report.