Genius and Courage? Bill Gross Placed Bold Bets Against Trump Media

Bill Gross, an investment veteran, took to social media platform X to broadcast his take on the situation. "A genius can also be an investor with the courage to sell DJT options at a 250 annualized volatility," he posted on last Thursday morning.

Gross is putting his money where his mouth is. The famed bond investor informed Bloomberg that he has sold put and call options on DJT with an April expiration, wagering that the stock will hover between $45 and $95.

This strategic move comes as the implied volatility for Trump Media's monthly at-the-money options reached a pinnacle of 250 this week—an all-time high—following a 78% surge in the company's share price since the previous Friday. This surge in volatility has inflated the cost of options contracts, enticing sellers with the potential for lucrative premiums, but also exposing them to the risk of substantial losses if the stock deviates significantly from current levels.

The company, which recently went public via a special purpose acquisition company (SPAC), has seen its valuation soar to roughly $9 billion, a stark discrepancy compared to the relatively modest earnings reported by its social platform, Truth Social, in the last year.

Investors, hungry for a piece of the action, are diving into various strategies, from trading call and put options to taking on expensive short positions and speculating on warrants linked to Trump Media.

Those willing to directly short the stock are facing exorbitant borrowing expenses, with annual rates ranging from 400% to 500%, making Trump Media the most costly U.S. company to short among those with over $100 million in short interest, according to data from S3 Partners.

The stock's volatility is further fueled by a limited float and a base of retail investors loyal to the former president. Companies like Trump Media that have emerged from SPAC deals often present a challenge for short sellers, as traditional share-lending sources such as mutual funds and ETFs tend not to hold large positions in SPACs.

As an alternative to the tight shorting market, investors may turn to put options. The options market for Trump Media has been abuzz, with calls expiring at the end of the current week drawing significant attention as traders leverage the stock's rally. Puts with strike prices below $60 or $65 have also been actively traded, offering a hedge if the stock were to decline.

Trump Media's stock price was noted at around $64 in Thursday's morning trading session.