By Michelle Conlin
NEW YORK (Reuters) – Trump Media’s (DJT) rollercoaster ride has served as a proxy of sorts for Republican presidential candidate Donald Trump’s election chances. Now traders are finally on their day of reckoning.
Trump Media stock fell 4% before the bell on Monday.
Traders and investors say the stock is at risk of extreme volatility after the outcome of Tuesday’s election is announced, with trading disconnected from daily business fundamentals. The company operates the Truth Social media platform and has launched a streaming service.
“This stock is insanely overvalued and the economy makes no sense even if Donald Trump is elected,” said Brian Lukow, a former senior vice president of Lehman Brothers and film producer who is now shorting stocks, a bet that the price of a stock will fall. In Trump Media, he thinks he has found his next best bet, if Democratic candidate Kamala Harris wins.
For the second quarter, Trump Media reported a loss of $16.4 million and revenue of $837,000. The company has a market capitalization of approximately $6 billion.
“Stocks will crash and burn if Harris pulls off a win,” said Lukow, who said he will continue to maintain his short position. “If Trump wins, this bet looks like the biggest bet he has ever made.”
For weeks, the rise in Trump Media shares has been accompanied by Trump’s surge on election betting sites such as Polymarket, where odds of the Republican’s victory rose as high as 67%.
The move has caught the attention of social media users and online gambling experts because it involved some big bets from a Paris-based trader and deviated sharply from opinion polls that had deadlocked the race.
However, when Trump Media’s stock fell sharply last week, Trump’s chances on Polymarket fell as well. On Sunday, Trump’s chances were about 54%.
There is no formal analyst coverage of Trump Media, which is 57% owned by Trump himself. According to Reuters calculations, the former president’s stake in the company is worth $3.5 billion. According to Forbes magazine, Trump’s total net worth is $5.6 billion as of Sunday.
The Trump campaign referred questions to Trump Media & Technology Group, the company’s full name. TMTG did not respond to a request for comment.
Trading startups
Trump Media stock has a fervent online following, including those who identify themselves as Trump supporters and pledge to hold the stock for the long term. The stock’s staunchest proponents often post publicly on Reddit and Truth Social, including in a group called $DJT, whose online banner is a rocket shooting into space.
One trader, who asked not to be named, told Reuters he took his position because he believes Trump Media has a good opportunity to make media acquisitions and that it could go even higher if Trump wins the election.
Others see the stock as a great short-term trading opportunity.
“It might be one of the best trades of the year,” said Vaughn McNair, who trades from his home in Joliet, Illinois, and was once a moderator on the Wallstreetbets Reddit forum during the GameStop meme stock frenzy of 2021.
McNair, known to his 34,000 followers on his YouTube channel “Making Easy Money” as Grandmaster-OBI, warned his followers on September 24 that Trump Media was the “ultimate gamma squeeze,” an options dynamic that can send a stock price sharply higher. . Over the next month, shares rose 236%.
McNair said he has already voted for Trump this year, but said his investment views are separate from his political beliefs.
Volatile stock
Trump Media stock has shown volatility as the election approaches. Trading was halted five times on Tuesday due to extreme price fluctuations. In the week before the election, the stock fell by about 27%.
If Trump wins, analytics firm S3 Partners said in an Oct. 29 report, there could be an increased risk of a squeeze. A short squeeze occurs when the rising price of an asset forces bearish investors to buy back borrowed shares.
Trump Media stock options have attracted excessive trading volume in recent days, with the stock often appearing on the list of most traded names in the options market.
According to options analysis service Trade Alert, an average of about 300,000 DJT options contracts changed hands every day last month, with the total option premium amounting to about $2.45 billion.
Traders expect massive stock volatility in the coming days, with options prices seeing a swing of around 50% in the share price in either direction by Friday, November 8.
“If Trump loses,” McNair said, “it will be bad for everyone in power.”
(Reporting by Michelle Conlin in New York; additional reporting by Noel Randewich in San Francisco and Saqib Iqbal Ahmed in New York; Editing by Megan Davies and Matthew Lewis)
