Trump Media Option Costs Soar With Election, Lockup End Looming

(Bloomberg) -- The cost of options on shares of Donald Trump’s media company has surged to the most expensive since it first started trading in March as traders brace for election-related volatility and the end of a lockup period on insider sales.

Most Read from Bloomberg

• How Americans Voted Their Way Into a Housing Crisis

• After a Record Hot Summer, Pressure Grows for A/C Mandates

• Chicago Halts Hiring as Deficit Tops $1 Billion Through 2025

• UC Berkeley Gives Transfer Students a Purpose-Built Home on Campus

• For Tenants, AI-Powered Screening Can Be a New Barrier to Housing

The implied volatility for Trump Media & Technology Group Corp. options expiring in three months is double the level back in mid-June. Translated to dollars and cents, it would take about a $15 move in the shares to make money from buying a December call and put around the current $18.63 share price.

There are good reasons that it has become costly to protect against big swings in the stock of the money-losing social-media company, which has become a sort-of meme stock closely tied to the Republican’s presidential campaign.

Insiders can start selling their stakes as soon as Sept. 19, potentially flooding the market with shares and depressing prices that have already fallen 77% since hitting an intraday high on March 26. And Tuesday evening’s debate between Trump and Kamala Harris may shift opinion on his chances of winning the election in November.

Even though the stock has been more volatile than Bitcoin, the options market is bracing for even bigger moves. As implied volatility — a key measure of options costs — has surged, realized swings have held mostly steady since mid-July.

For near-term contracts, volatility has spiked since the start of the month. On Tuesday, the most popular contract was the $20 call expiring Friday. Positioning around the lockup’s end appears to be a bit more bearish. The ratio of puts to calls expiring Sept. 20 is 1.6, though that may be skewed a bit by an outsized position equivalent to 3.2 million shares in $2.50 puts.

Looking further out, there’s also a huge premium for options expiring Nov. 15, just after the presidential election. The put-call open interest ratio for that expiry is just 0.66, with largest positions at $20.

Most Read from Bloomberg Businessweek

• EV Leases Go as Low as $20 a Month to Help Dealers Clear Their Lots

• The Covid Pandemic Left an Extra 13 Million Americans Single

• Putting Olive Oil in a Squeeze Bottle Earned This Startup a Cult Following

• Learning to Manage People by Talking to a Bot

• ‘They Have Stolen Our Business’: When You Leave Russia, Putin Sets the Terms

©2024 Bloomberg L.P.