Billionaire investor Bill Gross made $10 million betting against GameStop - after Elon Musk's 'GameStonk!!' tweet helped put him $15 million in the red

• Bill Gross made about $10 million betting against GameStop in January.
• The billionaire investor was down by $10 million to $15 million at one point.
• The Pimco cofounder criticized Elon Musk for cheering on the GameStop buyers.
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Billionaire investor Bill Gross made an ill-timed bet against GameStop in January that left him down as much as $15 million at one point. However, he held on until the video-game retailer's stock plunged, and walked away with about $10 million.

Gross, who cofounded Pimco and ran its flagship Total Return fund, now manages money for his family and foundation. He used options to wager that GameStop's stock price would fall, he said on the Citywire Selector podcast this week.

"I knew I had an advantage over Reddit and the boys," Gross said, highlighting his access to real-time options and volatility data on his Bloomberg terminal. However, he opened a bearish position on GameStop well before its shares peaked at north of $480 on January 28, and paid the price.

"I got in too early," he said. "I got short around $150 or $100 and at a decent size. I was losing millions of dollars and that's not a good feeling when you go to bed."

"Matter of fact, you wake up three or four times in the middle of the night and you check out GameStop on the black market," he continued.

While Gross admires Tesla CEO Elon Musk and views him as a "modern Thomas Edison," he didn't enjoy it when the executive tweeted "GameStonk!!" on January 26, throwing his weight behind the short squeeze.

"Musk is a little devil and he enjoys playing these games," Gross said. "He's just a frisky guy and so I didn't resent that, but it doubled the stock and that's when I lost the most sleep - it was after Musk did that."

"He probably should have known better, because that's close to yelling 'fire' in the theater," the investor added.

Gross thought about giving up and stomaching a loss, but he was confident that some of the day traders driving up the stock wouldn't be able to resist cashing out.

"I'm not regulated here like some of the hedge funds, and my broker's not calling me for margin and so on," he said. "At $400 I said, 'Hell no,' and so I doubled up to catch up, which was for me a very ballsy move."

Gross also analyzed the volatility of GameStop stock and determined that he was almost certain to come out ahead.

"It was one of those slam-dunk moments where yes, you could lose money, yes it could go to $1,000, but the volatility was priced so high that it was really hard to lose," he said.

"Risk-reward, it became one of those 'you're the casino,'" Gross continued. "That's when I doubled up, I sold more calls, and basically got out. I made a lot of money, maybe $10 million. But I was down $10 million and maybe down $15 million."

Gross felt vindicated that his assessments of the human nature and herd psychology at play, as well as the swings in the stock, were correct.

"It was a nice, intellectual, non-emotional moment for me in which I correctly analyzed the social aspects and the fact that people would turn on the group and sell before others thought they were gonna sell, and the volatility being so high priced that it was really hard to win," he said.

Regardless, Gross gave kudos to the Wall Street Bets community for their ingenuity.

"Their strategy to attack and squeeze shorts, certainly with GameStop, was a good one," he said. "I was really not expecting the stock to go through $10, $20, $30, $40, $100, $200, $300, $400 within the space of a few days."

However, the astounding stock rally was never going to last, he said in a research note on February 2. "Even without regulatory action, the plan was doomed from the beginning," he wrote.

Gross described the investors who bought options with 750% daily volatility as "fish at the poker table" in an earlier research note. He added that a "musical chair, me-first exit" from GameStop was inevitable and the price was bound to return to normal levels.