It looks like the SEC could finally be catching up to the artificial gamma squeeze that helped the NASDAQ nearly double off its March 2020 lows.
We were aghast when it was revealed in September 2020 that Softbank had bought about $4 billion worth of call options in names where it owned the underlying equity. The “strategy” seemed to clearly border on manipulation, despite apparently being legal.
Large purchases of out of the money call options in names that you own force dealers to buy up the stock, to hedge, causing dramatic (and unnatural) feedback loops higher for names when their stock would otherwise remain dormant.
And with the NASDAQ appearing to be on shaky ground of late, everyone is going to be looking for a scapegoat if the ground falls out underneath the index. Perhaps that’s why, as of now, legal website PlainSite says that FOIA reveals the SEC could be investigating SoftBank’s “strategy”.