(Bloomberg) - Trading options tied to former president Donald Trump’s media company is attracting meme-stock traders and Wall Street professionals. Add to that list erstwhile “Bond King” Bill Gross.
The eye-popping costs to flip derivatives betting on Trump Media & Technology Group Corp. given expectations for more wild swings was called out by Gross in a post on X.
“A genius can also be an investor with the courage to sell DJT options at a 250 annualized volatility,” he wrote on the social media platform Thursday morning.
Gross likes the idea so much, he’s trading it himself. The legendary investor told Bloomberg he has sold puts and calls that expire in April, respectively betting shares will stay between $45 and $95.
This week, implied volatility of Trump Media’s at-the-money contracts expiring in one month hit 250, a high for the stock, as the shares soared roughly 78% from Friday. With that key gauge at such a lofty level, the outright cost of options contracts is also sky high, offering sellers of puts and calls the chance to reap large premiums — while also risking sharp paper losses should the shares have wide swings.
Trump Media has become the latest way for speculators to use the stock market as a casino, raising memories of 2021’s meme stock mania. The company, which went public through a blank-check merger, has a roughly $9 billion valuation, far outstripping the modest revenue its Truth Social platform helped bring in last year.
The stock’s surge has investors desperate to get in on the action, using everything from call and put options, to costly short bets, to gambling on warrants tied to the company.
For those brave enough to outright bet against the stock, the price is stratospheric. Investors are facing annual financing costs of 400% to 500% to borrow, according to brokerages. That makes it the most expensive US company to bet against with over $100 million of short interest by a large margin, S3 data show.
A small pool of shares available to trade paired with Trump’s loyal following of retail investors has made the stock particularly volatile. Finding shares to borrow for companies that went public through a deal with a special-purpose acquisition company typically is tricky because long-oriented shareholders like mutual funds and ETF providers — the usual sources for shares available for lending — rarely have large SPAC positions.
Investors looking to bet against difficult-to-short stocks may buy put options as an alternative. Options trading has been very active in both directions. Calls expiring at the end of this week were the most popular as traders chased the rally, while puts that would make money if shares close below $60 or $65 were also heavily traded.
Trump Media was trading at around $64 Thursday morning.
By Bailey Lipschultz, Carly Wanna and Yiqin Shen
