Duan Yongping, known as the "godfather" of China's smartphone industry, also made a fortune during the recent GameStop short squeeze.
Duan is the founder and chairman of Dongguan-based BBK Electronics Corp, which is behind smartphone brands Oppo, Vivo, OnePlus, and Realme.
According to China-Venture, Duan sold 100 GME naked call options (equivalent to 10,000 GME shares) that expire on February 12 a few days ago, giving him a profit of more than $400,000 based on a $40-a-share premium.
As long as GME shares don't rise to $800 by Friday, he's guaranteed that gain. And it's worth noting that GME was down 30 percent when as of market close on Monday and then fell about 16 percent after hours to $189.52. It's highly unlikely that GME shares will reach $800 this week.
Selling naked call options means selling a call option to a counterparty for a premium in the absence of a spot, and in this case, it’s GME stock.
This is one of the riskiest of the various short-term financial operations and is typically an operation of low returns but high risks.
USD 400,000 is the upper limit of Duan's return on this investment, but at the same time, he has to bear the uncapped risk.
If GME rises to $1,000, he will lose $1.6 million. And if the GME rises to $10,000, his loss will be $91.6 million, even though the possibility of that is almost non-existent.
This is not the first time Duan has made such a high-risk short-term move. According to his previous postings on Chinese social media platforms, he sold put options on Tesla three times last January, July, and December, with gains in the tens of thousands of dollars each time.
It's worth noting that Duan had previously studied the fundamentals of GME, which he thought had a poor business model and was going to break down before long.
But Duan believes in value investing and insists on investing only in stocks he understands and did not choose to short GameStop just because he thought the company was going to collapse.
It was this belief that helped him to avoid this GME shorting.
Short seller Citron is shorting NIO, says stock should go back to $25