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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

#91

Post by ambicapter »

darth_avocado wrote: post #31
fragmede wrote: post #19

Earlier quoted context omitted.

Reminder that economist have predicted 9 of the past 7 recessions. General handwavy statements like "there's a bubble" aren't worth paying attention to. Ones with specific timelines attached to it (like the one above, or the article we're commenting on), are worth listening to a bit more, but unless they have the funds to back it up (like Michael Burry has put down here), it's still hot air.

Palantir has a market cap of $400B+ and Nvidia is $5T. This short translates to 0.225% and 0.00374%. This mostly translates to a thesis that the stocks would “probably” go down a bit than a bet that predicts recession.

What do the percentages 0.225% and 0.00374% mean here? Is that the size of his position relative to the company's market caps?

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

#92

Post by zipy124 »

bgirard wrote: post #21
Havoc wrote: post #16

Earlier quoted context omitted.

His wins were quite big so I’d imagine he’s doing really well overall

Is there anything more concrete than that? Large wins on their own aren't meaningful if they aren't good risk adjusted trades or repeatable. I've made big wins but I don't consider myself a good trader.

From may 2020 to may 2023 they did 56% annualised. Performance apart from that is unreported, so likely lower or negative.

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

#93

Post by TacticalCoder »

_f9cu wrote: post #6

how to do such betting ?

TFA says "bought put options". One option (either PUT or CALL) is typically 100x the shares (but mini lots of 10x exists or at least did exist at some point).

So he bought (he's long on the PUTs) 10 000 PUTs on NVDA and 50 000 PUTs on PLTR. I don't know at which expiration dates nor at which strikes.

A PUT option can be either a bet (like in TFA) that an underlying shall go down below a certain price before a certain date of it can be an hedge when you own the stock, believe it could go up some more, but also want to be protected should it crash. Now of course hedging has a cost and it's not cheap: an option is an insurance. Even the terminology is the same: the buyer pays a premium and the seller (i.e. the one selling the insurance) collects that premium.

Now if you want to learn about full-on degenerate gambling, these last years there's been an explosion in "0DTE": options with zero day to expiration. Because they're 0DTE, there's very little "extrinsic" value in these. So it's a "cheap" way to get basically 100x leverage (either short or long).

Here's a small documentary of 5 minutes about 0DTEs:

https://youtu.be/5atTocDOTpY

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

#94

Post by 1vuio0pswjnm7 »

_f9cu wrote: post #6

how to do such betting ?

https://www.fool.com/investing/how-to-invest/stocks/how-to-s...

https://www.schwab.com/learn/story/shorting-stocks-your-inve...

https://www.fidelity.com/viewpoints/active-investor/selling-...

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

#95

Post by smallmancontrov »

ericmcer wrote: post #69
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.

Yeah I feel like 200m of PLTR put options would distort the market so much the contracts would struggle to overcome their own premium. They must be referring the the value of the shares the contracts represent?

On a single contract, maybe, but remember that the counterparty is usually a market maker who doesn't take directional risk, their game is to bet that the cost of delta hedging is less than the premium they collect, and that's more of an implied vs realized volatility thing than a directional thing. Even if we took it for granted that Michael Burry was smart money, to a first order approximation the dealers don't care and would be happy to earn fees for managing his leverage.

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

#96

Post by luddit3 »

the__alchemist wrote: post #49
lvl155 wrote: post #28

Just because something is expensive doesn’t mean you should short it via puts as Burry had done. Both Palantir and Nvidia have high IVs. You’re paying for that. You’re much better off looking for cheaper puts on securities with enough correlation. Since Volmageddon and pandemic craze, deep OTM options have been scalped to death. Rarely good value. Nvidia also didn’t report earnings yet which means you’re paying for t…

Can someone explain why puts make sense over shorting? For example, I'm betting against 5 quantum computing companies with short positions. I considered adding puts to the position, but it didn't make sense based on 2 reasons: High bid ask spread, and if it's a fraudulent company/otherwise worth betting against, the volatility will be high, so you option costs too much compared to the upside; the amount it has to dro…

Derivative markets are almost always there to provide leverage. Yeah, thinly traded options are a significant downside. If you can get in and out of the contracts, you can always combine options to remove some of those volatility costs by selling as well as buying, ie, spreads and ratios.

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

#97

Post by smallmancontrov »

datavirtue wrote: post #72
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.

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?

Once you fully risk manage a short position and account for the price of doing so, you might realize that you have reinvented a put contract.

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

#99

Post by tommy_axle »

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.

Technically writing calls is also taking the downside.

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

#100

Post by huhtenberg »

ProjectArcturis wrote: post #48
sfblah wrote: post #33

The problem with these kinds of bets is the Fed Put. That's the invisible force levitating stocks. I don't really see that changing unless/until the country genuinely enters a debt or currency crisis. The path is unsustainable, but they'll keep it going as long as they possibly can.

When Trump replaces Powell next year, the odds of the Fed doing something other than bathing a crisis in liquidity goes way up.

To add some context -

Powell's 4-year term ends January 31, 2026. Whether he is reconfirmed by the Senate for another term is an open question.

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