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Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

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Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#81

Post by throwaway481048 »

I am not a fan of public figures (seemingly) using their power to attempt to influence price movement in equities.

The market action following someone like Elon Musk’s tweets about $GME, DOGE, and others, show high correlation with the sentiment in those tweets, at least from my armchair. Sure, Burry was correct in a similar scenario before. I don’t believe that means others should immediately believe/trust and follow individuals like this to the end of the earth, however.

Shorting a stock is a very different - and far more risky - investment “strategy” than the purchasing of a stock. I should know, I lost 2 months of gains on a single short over a 3 day period, despite all market intelligence, facts, and the logic which follows, pointing to the fact which the stock should have bottomed, not skyrocketed.

Despite most of its participants being relatively predictable, the market never ceases to surprise. Headlines like this should at least lead to an article with a highly visible notice or disclaimer about the risks of mimicking the mentioned behavior.

Edit: I see I am being downvoted without discussion. I’m open to learning what I may have missed.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#82

Post by alex_young »

incrudible wrote: post #61
turbinerneiter wrote: post #15

Teslas price is just too high. I think they will be very successful and become a big, dominant car maker. But their price only makes sense if they end up being the only car maker left. That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the…

> I won't short them tough, in the end I'm just a dog on the internet and have no clue how stonks work. To be clear, Michael Burry didn't short Tesla, he bought put options, which gives him the right but not the obligation to sell Tesla stock for a certain price, on a certain date. If the bet works against him, his options expire worthless. This puts an upper limit on his losses. If you have an actual short position,…

> If you have an actual short position, your potential losses are unlimited.

Isn’t this a bit like saying that the potential upside of holding any stock is unlimited?

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#83

Post by curiousgal »

6gvONxR4sf7o wrote: post #65
jeremydeanlakey wrote: post #17

> $530 million bet > long puts against 800,100 shares I find the title misleading. Unless I misunderstand, Michael Burry has not actually put $530M of his money at risk. He's made a much smaller, leveraged bet. $530M is just the notional value.

Can someone ELI5 how this works to those of us who only buy and sell things? I've looked up the definitions, but I'm curious about the purposes and practical risk/reward scenarios of this particular sort of bet.

A put is a option contract that gives its holder the right to sell a share at a certain price (strike) within a certain time (maturity for American options, European options can only be exercised at maturity). If you buy a put of strike 100 and a stock is at 90 you can exercise it thus selling the stock at 100 which is higher than its actual price.

So when you buy a put you are betting that the stock is going to go down. Each put usually gives you right to sell 100 shares, and since you can buy/sell the contract itself, you can easily get leverage when compared to actually trading the shares.

Without knowing what the strike prices and how much he paid for those contracts you can't really determine how much he is going to gain/lose. His gain is capped though as TSLA cannot go below 0.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#84

Post by patorjk »

overhero wrote: post #74
patorjk wrote: post #64

> Besides his “Big Short,” Burry made a killing from a long GameStop position recently as the Reddit favorite made Wall Street history with its massive short squeeze. Except I remember reading that he sold for before the price exploded [1]. So although he made a profit, he missed out on the squeeze because he sold too early. [1] https://markets.businessinsider.com/news/stocks/big-short-mi...

he was not wrong though, just too early

I'm not saying he's wrong, but the article is misleading. The massive squeeze didn't happen until late January, and Michael had sold his position by the end of December. So although he was right/made a profit, he didn't make a killing from the huge squeeze that made the news.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#85

Post by Hamuko »

Shacklz wrote: post #76
turbinerneiter wrote: post #15

Teslas price is just too high. I think they will be very successful and become a big, dominant car maker. But their price only makes sense if they end up being the only car maker left. That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you. For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the…

> I think they will be very successful and become a big, dominant car maker. "Big, dominant" in the same sense as maybe Ferrari: Prestigious cars for a niche audience that are willing to pay a premium for the brand.

Ferrari is way more exclusive than Tesla. I would rather imagine Tesla becoming a Jaguar - kinda exclusive but not that rare.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#86

Post by benmller313 »

alex_young wrote: post #82
incrudible wrote: post #61

Earlier quoted context omitted.

> I won't short them tough, in the end I'm just a dog on the internet and have no clue how stonks work. To be clear, Michael Burry didn't short Tesla, he bought put options, which gives him the right but not the obligation to sell Tesla stock for a certain price, on a certain date. If the bet works against him, his options expire worthless. This puts an upper limit on his losses. If you have an actual short position,…

> If you have an actual short position, your potential losses are unlimited. Isn’t this a bit like saying that the potential upside of holding any stock is unlimited?

Yes. Is that not true?

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#87

Post by selectodude »

cosmojg wrote: post #77

This guy has been wrong a lot recently. Admittedly, he was right once and in a big way. However, remember that success is mostly luck, and this is orders of magnitude truer for success in public markets. Outside of entertainment, it isn't worth the time to follow celebrity investors.

He was long GME and shorted tech in the early 2000s. He's gotten more than a few trades correct.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#88

Post by antattack »

Tesla is just too many things to reliably short it though. AI company, car company, transportation company, energy storage/solar company.

For example, even amid ongoing China defamation efforts, 4680 battery production 'postponed', updated S and X still being tweaked, upcoming V9 FSD beta release could make the stock blow up again as it did around V8.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#89

Post by ecpottinger »

988747 wrote: post #57
rubiquity wrote: post #11

Earlier quoted context omitted.

Short sellers aren’t pessimists. They’re realists.

It's not even about that. It's just about not wasting an opportunity to make money. Some stocks go through cycles: growth, then correction, then growth again. Shorting stock during market corrections helps you maximize your profits. I mean, I can imagine Michael Burry cashing $200M profits when Tesla price goes down, and then switching sides and going long. The most important thing in the stock markets is to remain r…

I think you bring up an very valid point. In the Tesla forums I see posts from only one person making money over shorting Tesla stock. He works on making $10-$50 a share whenever the stock falls and then he makes money as a long when the stock goes up. Over time he has made a lot of money. He is not greedy, he is steady.

On the other-hand, I see tons of people gleefully saying how much they hate Elon and because of him Tesla is going to collapse and as soon as that happens they will make a ton of money. I keep asking them to post when they make this windfall, well it has been over five years for me and so far not one of them have come back to tell how much money they have made. Greed seems to be blinding them to how much their approach is failing.

The rational player has been making money for years, the ones who seem to be basing their investments on emotion have never come back to say they made any money.

PS. I am a long, I bought Tesla stock at $189 pre-split, even at today's lower prices each share now represents $2825, it has to fall a lot for me to be taking a loss.

Re: Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

#90

Post by splithalf »

cosmojg wrote: post #77

This guy has been wrong a lot recently. Admittedly, he was right once and in a big way. However, remember that success is mostly luck, and this is orders of magnitude truer for success in public markets. Outside of entertainment, it isn't worth the time to follow celebrity investors.

Yep. Even Kathy woods understands regression to the mean.
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