The phrase “don’t try this at home” may have been made for moments like this.
Bond King and Pacific Investment Management co-founder Bill Gross said he went $ 10 million short on GameStop GME,
stocks during the stock shopping frenzy earlier this year, but not before the retired billionaire lost several million dollars.
He explained in an interview to Bloomberg Television on Tuesday how that transaction deteriorated. ‘I came in too early. I got options as a good Robin Hood trader, I guess… and sold calls around the $ 150, $ 200 level, ”said Gross, adding that the stock then went up to $ 400.
“I managed to overcome my insecurities and ride it all the way back in terms of getting out,” said Gross. “I was about $ 10 million in the hole, but I’m about 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 fixed price, the so-called strike price, which means that Gross would have been obliged to buy the stock at a higher price then he sold it when the option was exercised.
Gross said he is still back in GameStop stock, still selling call options at the $ 250 and $ 300 per share levels. If those stocks exceed those levels, the billionaire may find himself losing money again. “The volatility is super high and that promotes the ability to make some money,” he said.
Indeed, GameStop stock has been the target of short sellers this year, who, in part, compete against individual investors organized by Reddit’s WallStreetBets crowd. The drama has led to an investigation in Congress, which continues Wednesday, into the brief press from GameStop, AMC Entertainment AMC,
and other stocks.
Read: GameStop Round 2? How a frenzy over buying options gives new shock to meme stocks
Shares of GameStop started the year at $ 18, rose to over $ 300 at the height of the frenzy in late January, dropped to $ 40 and recently climbed back up to the $ 200 level. Shares are up more than 1,000% since the start of the year, but have lost 21% this week alone.
Gross retired from his post-PIMCO performance as a portfolio manager at Janus Henderson in 2019 and now focuses on managing his charity.
Once in charge of the world’s largest bond fund, Gross also told Bloomberg that he was betting against U.S. Treasuries and said he expects inflation not to fall below 2% in the coming months, but to hover more at 3%. up to 4%. The return on 10-year Treasurys TMUBMUSD10Y,
have risen to levels not seen in more than a year as investors expect strong economic reopenings in the US, boosted by vaccines.
Gross’s inflation rings with analysts saying some of the inflationary rise that will occur this year would be due to so-called base effects, as weaker months of inflation were phased out of the annual measures over time, leading to mechanical higher price levels.
This phenomenon would kick in in the coming months, when the deflationary blow from the coronavirus pandemic last year is removed from the annual inflation measures reported by the U.S. Department of Labor.
Sunny Oh contributed to this report.