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Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

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Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#121

Post by zahlman »

JumpCrisscross wrote: post #71
pksebben wrote: post #51

Earlier quoted context omitted.

if you're remotely serious about 'trying' this stuff out, do it in paper trades first. The options world is full of the corpses of dead portfolios.

> options world is full of the corpses of dead portfolios Former options market maker here. Please don’t buy options as a retail investor. ( Maybe write to generate income.)

Do you think they're overpriced? Or do you just not trust retail investors to understand the effective leverage, spread of outcomes etc.?

I'm told that covered-call ETFs generally underperform (in addition to being inefficient) and "generating income" is best accomplished by just selling shares as needed.

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#122

Post by astrange »

blitzar wrote: post #29
strictnein wrote: post #15

Earlier quoted context omitted.

Not usually a good idea if you're not a skilled investor, but here's a place to start: https://www.investopedia.com/ask/answers/06/sellingoptions.a...

Selling (writing) options is NOT how you bet against a company. You either sell the stock short or buy puts.

I would simply correctly price the equities in the first place.

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#123

Post by Gud »

IAmBroom wrote: post #109
brokencode wrote: post #104

Hasn’t he been incorrectly predicting massive crashes every few years ever since he was right that one time? How many bad predictions does he need to make before people stop caring what he has to say?

He's predicted 20 of the last 2 recessions, so there's that.

Has he or are you just repeating a funny joke?

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#124

Post by [deleted] »

lordnacho wrote: post #9

I'm not sure the bet is as big as it seems from the headline. When you buy options, you pay a fixed premium to get the right to buy/sell a very large value of shares, called the notional. But the notional is not what you are losing if it goes wrong, you lose the premium. The premium can be quite a small number compared to the notional.

[deleted]

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#125

Post by harmmonica »

My two cents... He might think the bubble is about to burst; he might be hedging his downside risk after a serious rise in his overall portfolio, picking the two stocks he thinks are the most out of whack valuation-wise to execute that hedge (the premium for the puts would likely be a fraction of the paper gain he's sitting on so not the end of the world if they expire worthless); he might be hedging significant material gains in these exact two stocks; he might be doing it for some only-billionaires-get-it reason. I guess I'm just saying that the reason could be pretty detached from "I think the bubble is about to burst!"

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#126

Post by locallost »

Gud wrote: post #123
IAmBroom wrote: post #109

Earlier quoted context omitted.

He's predicted 20 of the last 2 recessions, so there's that.

Has he or are you just repeating a funny joke?

He's been bearish for the last n years. His Twitter handle is Cassandra because he tries to warn people about impending doom, but nobody listens. He gave up at one point because he tweeted SELL and then everything was fine.

tl;dr he's a perma bear.

I actually don't think he's wrong, but one thing I've learned is that it's not enough to recognize a bubble. Almost everyone sees the markets are, as they say, frothy. But you need to see if there's a needle nearby. Without that you're just trying to get lucky.

Puts especially are really hard because they expire. They limit your loss compared to shorts, but you need to time it perfectly.

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#127

Post by giraffe_lady »

AzzyHN wrote: post #118

A bet against Nvidia is smart. A bet against Palantir is not. Palantir has become deeply integrated into the surveillance states of America, and won't be going anywhere anytime soon.

Welll....

I'm old enough to remember it being impossible to imagine a world without the USSR in it.

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#128

Post by nickff »

lukewink wrote: post #77
datavirtue wrote: post #72

Earlier quoted context omitted.

They are only selling puts...that's a half-hearted short. They have the resources to borrow shares and bag the whole amount without a time constraint...why not do that?

Selling puts is not a short at all

It is commonly referred to as a ‘short position’, though it is not ‘shorting the stock’. Equally, purchasing calls* is referred to as a ‘long position’ (as is holding the equity).

edit: smallmancontrov below pointed out that I wrote 'purchasing puts' was long, when I meant to write 'purchasing calls'

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#129

Post by pleasedontman »

embedding-shape wrote: post #46
FanaHOVA wrote: post #34

Earlier quoted context omitted.

The equivalent of "If you have to ask, you can't afford it" here is "If you have to ask, you shouldn't do it".

Overall for the common person I'd agree, but I assume we're all more or less hackers here and for us, I'd say "If you have to ask, ask and learn, then do it". If everyone followed your advice no one would ever do anything, as we all begin somewhere, something that should OK. Of course, don't do million dollar trades when you begin, but we shouldn't push back on people wanting to learn, feels very backwards compared t…

we shouldn't push back on people wanting to learn but we should really point out very loudly that not fully understanding something like shorting can turn a small investment someone was fully ok with losing into a life altering bankruptcy due to a margin call.

Leverage can be a fearful thing.

Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir

#130

Post by zahlman »

ivape wrote: post #57

Burry was right about a scam. AI is not a scam. His short positions could simply be a conviction on rate of growth. If he was truly shorting it into collapse, then I'd say he's misguided here. There are also other factors that affect Nvidia. Any move on Taiwan can collapse Nvidia's price down to zero. Hyperscalers can also shift orders over to AMD, Intel, ARM and Broadcom. This is inevitable, but you can't be too ear…

> If he was truly shorting it into collapse, then I'd say he's misguided here.

He's not shorting this time. He has put options. This is a "short position" i.e. one that behaves inversely to the stock price, but his downside is limited (at the expense that he pays the full downside up front, and can lose money even if the stock goes down, if it doesn't go down by enough).

TFA says the options are on "roughly 1 million NVDA shares worth $187 million", implying NVDA was around $187 at the time of acquisition. That more or less tracks with the September 26 close, and this was apparently disclosed in a September 30 filing. NVDA is currently above $200. Similarly, he would have options on PLTR bought when that was also somewhere around $182 (roughly matching the September 30 close); even with today's crash, the stock is hovering around $190 as I write this.

So depending on the duration of the options there's a pretty decent chance he's going to lose money, and depending on the strike price it might well be the entire premium. As far as I can tell, neither of these is disclosed in the filing.

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