Trump was overjoyed on Monday and Wednesday: nearly $500 million in margin was reduced to $170 million by the appellate court, and the stock price of DWAC, which was listed on a backdoor, surged by 35%. Coupled with winning the golf championship over the weekend, Trump is now proud of himself.
Especially on Monday, DWAC's stock price reached a high of $49.95, fully demonstrating the market's pursuit of the Trump brand. And this helped Trump successfully squeeze into the world's top 500 billionaires.
Trump's Media Technology Group (TMTG) and Shell Company DWAC announced on Monday that their business merger and acquisition deal has been completed. Starting from Tuesday, Trump Media Technology Group, which has completed a reverse merger, will be listed for trading on the NASDAQ exchange under the trading code "DJT". Trump holds 58% of DJT's equity.
But interestingly, while DWAC's stock price surged on Monday, the market also saw a frenzy of buying put options on DWAC's stock price.
According to statistics, the trading volume of DWAC put options that expire on April 19th and have an exercise price of $2.50 is as high as 15321. The trading volume of options that expire on the same day but have an exercise price of $5 is also over 5700. This means that DWAC's stock price will decrease by 95% and 90% respectively compared to the current level.
This seems to represent a bleak future for DWAC, but traders are betting that this Trump concept stock will lose almost all its value in just three weeks without any fundamental basis on its own.
Industry insiders suggest that traders may not expect to be able to execute these put options.
A type of hedging
Considering the significant fluctuations in DWAC stocks since mid January, it seems not difficult to imagine a decline in stock prices.
However, Steve Sosnick, Chief Strategist at Yingtou Securities, pointed out that some traders may only purchase put options to meet the broker's requirements. Because when facing highly volatile targets, brokers may prohibit traders from selling unsecured naked options.
He explained that traders can purchase put options at much lower than normal prices as an alternative to turning high volatility into theoretically limited risk trading.
Sosnick also pointed out that this method is just a less common type of trading, but given that the stock is currently in an abnormal trading atmosphere, it may be able to deceive some people's risk management systems.
As of Monday, approximately 396000 option contracts have changed hands in the market, almost 10 times the average level of the past month. Among them, the number of put options exceeds that of call options, and the increase in implied volatility of a one month put option is higher than that of a call option, indicating that some people hope to hedge against the risk of future stock price declines.