The Untold Story of the Nasdaq Whale: SoftBank’s a Guppy; JPMorgan’s a Whale

Largest Amounts of Equity Derivatives

No one holds as many equity derivatives as JPMorgan Chase, which according to OCC data possesses 67% percent of all equity derivatives held by all commercial banks, savings associations and trust companies in the United States.

By Pam Martens and Russ Martens of Wall Street on Parade

Last week there was a big buzz among financial media outlets regarding the Japanese conglomerate, SoftBank. According to unnamed sources who spoke to the Financial Times, over the past few months SoftBank has paid about $4 billion in premiums, buying call options on individual U.S. technology stocks. The Financial Times called SoftBank the Nasdaq Whale and said its call buying had “stoked the fevered rally in big tech stocks before a sharp pullback” at the end of last week.

A call option on an individual stock is a derivative that gives the buyer the right, but not the obligation, to purchase the actual stock at a specified price (strike price) over a specified time period.

According to the Financial Times, the call options purchased by SoftBank gave it exposure to approximately $30 billion in the stock of big tech companies.

The Wall Street Journal, again citing unnamed sources, wrote that SoftBank focused its $4 billion of call buying on tech stocks it already owned, as well as other tech names.

In a 13F filing that SoftBank made with the Securities and Exchange Commission for the period ending June 30, 2020, it indicated it owned a total of $17.5 billion of stock, including the following: $1 billion in Amazon; $475 million in Alphabet (parent of Google); $183 million in Microsoft; $189 million in Netflix; and $123 million in Tesla.

Even if you add in Softbank’s rumored $30 billion in derivative exposure to tech names, this is still pretty much chump change compared to the holdings of JPMorgan Chase – a bank that was documented in a 300-page report by the U.S. Senate’s Permanent Subcommittee on Investigations as being the “London Whale” that used hundreds of billions of dollars in bank depositors’ money to make high-risk, market-moving derivatives trades in 2012, losing $6.2 billion in those ill-fated gambles. We pointed out in our reporting at the time that the bank was also engaged in trading stocks or stock derivatives with the depositors’ money. That part of the Senate report was apparently so combustible that it had to be redacted from the eyes of the public.

The London Whale case was turned over to the FBI but no criminal charges were brought against the bank itself. The bank paid $900 million in fines to various regulators and was found to have engaged in unsafe or unsound banking practices

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