The recent launch of Trump Media & Technology Group has been nothing short of a spectacle in the stock market, with its valuation skyrocketing to $9 billion and then plummeting, capturing the attention of traders and investors alike. The volatility of the stock has not only made it a hotbed for traders looking to capitalize on its fluctuations but has also significantly impacted the fortune of its major shareholder, former President Donald Trump.
Graphs illustrating the stock's unpredictable journey indicate that its shares, last priced at $32.41, have fallen by 54% from their initial trading price on March 26. This dramatic shift occurred after the company, known for operating Truth Social, merged with Digital World Acquisition. This merger, announced in 2021, faced numerous hurdles and delays before its completion.
The fluctuations in the stock price have mirrored changes in Trump's net worth, which soared to over $6 billion when the stock peaked at $79.38 on its trading debut. This surge briefly placed Trump on the Bloomberg Billionaire Index, marking his debut among the world’s 500 richest individuals, with his stake's value now adjusted to approximately $2.6 billion.
Despite the potential restrictions from a six-month lockup period preventing Trump from liquidating or leveraging his shares, the spike in value could offer a financial boost as he navigates through a $454 million civil fraud judgment.
The allure of the stock has attracted short sellers, who bet on the stock's decline by selling borrowed shares. Prior to trading under the "DJT" ticker, Digital World Acquisition became a prime target for short sellers, with about 16% of its free float being shorted, making it the most heavily bet against Special Purpose Acquisition Company (SPAC) by March 25, according to S3 Partners data.
Shorting SPACs presents more challenges than typical stocks due to the scarcity of shares available for borrowing, as analysts have pointed out. Currently, about 12% of DJT's free float is shorted, making it the costliest stock to borrow for those betting against it, with at least $50 million in short interest.
The initial days following Trump Media's stock market debut saw a flurry of bullish activity in its stock options, although it has since moderated, it remains active. The options market is now characterized by a wide range of open contracts, from $2.5 put options to $100 call options, reflecting diverse market sentiments.
Market speculators, anticipating significant movements in either direction, have been particularly active, contributing to the vibrant trading environment. The stock's 30-day implied volatility stands at an astonishing 160%, indicating expected daily price movements of around 10%. This is in stark contrast to the average 30-day implied volatility of 44% among the five most actively traded options names, as per Trade Alert data.
