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Michael Burry shorts Major index in sizable bets

thestreet.com

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Re: Michael Burry shorts Major index in sizable bets

#31

Post by rubyn00bie »

ilaksh wrote: post #4
guywithabowtie wrote: post #2

Burry and his Scion Asset Management fund bought put options (contracts giving the option to sell at a certain price) with a value of $886 million against the SPDR S&P 500 ETF Trust which tracks the S&P 500. Scion also bought put options totaling $739 million against against the Invesco QQQ Trust ETF QQQ that tracks the Nasdaq 100. The $1.6 billion Scion spent betting against the market represents 93% of the fund's e…

How often does the Nasdaq go up 40% and then stay up? I don't really know anything about the stock market, but do you really need to be a maverick to guess that it might go down again?

Last year, the entire Nasdaq was rocked with companies like NVidia, Meta, Tesla, Netflix, Apple, Google down anywhere between ~35-70% from their all time highs. A rally of this magnitude is notable, but they're by-and-large just regaining ground they already had (save NVidia which just rocketed past its all time highs). For some perspective on how much those megacaps influence the entire index, the top ten companies in the Nasdaq account for ~50% of the entire index.

Re: Michael Burry shorts Major index in sizable bets

#32

Post by thefourthchime »

FWIW: Clark Howard, a finance guy I highly regard, predicts that the 4th quarter will see a softening of the economy. His reasoning is that the regional banks are being extremely tight with lending right now, and by the fourth quarter many small/medium businesses will have trouble staying afloat due to the lack of financing.

Re: Michael Burry shorts Major index in sizable bets

#34

Post by ivalm »

thefourthchime wrote: post #32

FWIW: Clark Howard, a finance guy I highly regard, predicts that the 4th quarter will see a softening of the economy. His reasoning is that the regional banks are being extremely tight with lending right now, and by the fourth quarter many small/medium businesses will have trouble staying afloat due to the lack of financing.

But are small businesses that important at this point?

Re: Michael Burry shorts Major index in sizable bets

#35

Post by klipklop »

oblio wrote: post #33
Havoc wrote: post #14

Everyone and their dog knows this is gonna crash. The question is when. > “Markets can remain irrational longer than you can remain solvent”

Why crash? We've almost deflated the bubble with the help of crypto and high inflation.

Looking at the real estate market the bubble did not deflate. (Maybe it's not in one?) Now it just costs people buying at today's interest rates significantly more per month.

Re: Michael Burry shorts Major index in sizable bets

#36

Post by slashdev »

senthil_rajasek wrote: post #23

From earlier this year (Jan?), Michael Burry of ‘Big Short’ fame expects another ‘inflation spike’ after recession rocks U.S. " Cassandra B.C. @michaeljburry · Inflation peaked. But it is not the last peak of this cycle. We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike. It's not…

He can be wrong on the timing but right on the prediction. I think he could still be right here in 2024. Certainly he was right about inflation peaking. So now is that recession still to come or not?

Re: Michael Burry shorts Major index in sizable bets

#37

Post by arcticbull »

guywithabowtie wrote: post #2

Burry and his Scion Asset Management fund bought put options (contracts giving the option to sell at a certain price) with a value of $886 million against the SPDR S&P 500 ETF Trust which tracks the S&P 500. Scion also bought put options totaling $739 million against against the Invesco QQQ Trust ETF QQQ that tracks the Nasdaq 100. The $1.6 billion Scion spent betting against the market represents 93% of the fund's e…

He probably bought put options with a notional value of $886/$739, but the premium is dramatically less than that. He's not betting more than like 10% of the fund. It's not clear the way the article is written, but the man's crazy, not bonkers. If he spent $1.6B in put option premiums he's playing to be the first trillionaire.

Re: Michael Burry shorts Major index in sizable bets

#38

Post by dragonwriter »

slashdev wrote: post #36
senthil_rajasek wrote: post #23

From earlier this year (Jan?), Michael Burry of ‘Big Short’ fame expects another ‘inflation spike’ after recession rocks U.S. " Cassandra B.C. @michaeljburry · Inflation peaked. But it is not the last peak of this cycle. We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike. It's not…

He can be wrong on the timing but right on the prediction. I think he could still be right here in 2024. Certainly he was right about inflation peaking. So now is that recession still to come or not?

> He can be wrong on the timing but right on the prediction.

The prediction, stripped of timing, is nothing. “Someday, there will be a market crash” is almost certainly true, but means nothing.

Re: Michael Burry shorts Major index in sizable bets

#39

Post by arcticbull »

ilaksh wrote: post #4
guywithabowtie wrote: post #2

Burry and his Scion Asset Management fund bought put options (contracts giving the option to sell at a certain price) with a value of $886 million against the SPDR S&P 500 ETF Trust which tracks the S&P 500. Scion also bought put options totaling $739 million against against the Invesco QQQ Trust ETF QQQ that tracks the Nasdaq 100. The $1.6 billion Scion spent betting against the market represents 93% of the fund's e…

How often does the Nasdaq go up 40% and then stay up? I don't really know anything about the stock market, but do you really need to be a maverick to guess that it might go down again?

Since it's right around ATH right now I'd say 100% of the time, give or take.

Re: Michael Burry shorts Major index in sizable bets

#40

Post by ivalm »

jjoonathan wrote: post #5
xcxcx wrote: post #3

He's not short the index, he's long the puts. Different convexity profile.

I need some ELI5 help here. Does that mean he bet on a big, fast downward move as opposed to a slow, small downward move?

Short equity = fixed upside, unlimited downside, does not “spend money”, just need collateral.

Puts = fixed upside, fixed downside, spend money/does not need additional collateral.

The option version of an equity short is something like buy ATM out and sell ATM call.

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