That 723M$ figure for nasdaq is not the worth of the put options themselves, rather the value of the underlying shares that the contracts represent. He likely has 20K put options each for $SPY and $QQQ. No one is going to bet 93% of a portfolio is index puts. They're likely hedges worth tens of millions, not 1.5B$ in put options.
From earlier this year (Jan?),<p>Michael Burry of ‘Big Short’ fame expects another ‘inflation spike’ after recession rocks U.S.<p>"
Cassandra B.C.
@michaeljburry
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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 hard.<p>"<p>None of these predictions were right.<p>The lesson here is always do your own homework. Or get a trusted financial advisor.<p>p.s since his twitter handles are ephemeral I saved the tweet that was attributed to him.
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.
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.<p>The $1.6 billion Scion spent betting against the market represents 93% of the fund's entire portfolio.<p>This is a reversal from the bank buying spree Scion went on in the first quarter before economic stress led to the dissolution of multiple mid-sized banks.<p>The S&P 500 and Nasdaq have actually had strong years so far in 2023, climbing 17% and nearly 40%, respectively.
This guy was very right once and has basically been wrong ever since - why is this interesting? Remember his massive bets on water and disastrous short position on Tesla?
It’s a 13F filing [1], so the article’s phrasing is a little sensationalist. The big number is the value of the underlying stocks, not the premium paid on the options, which is what they’d be risking. The information is 45 days old and they could’ve exited this position the next trading day, 42 days ago (July 3rd).<p>The $1.6b number comes from listings of:<p>$738,840,000 for QQQ Puts.<p>$886,560,000 for SPY Puts<p>Which is calculated based on the closing value of the underlying stocks on June 30th. Option contracts are for 100 of the underlying security, so 2M reported shares is 20k options.<p>$886.56M = $443.56 * 20k * 100<p>If the value of the options contract is $1, the positions for both securities could be replicated for $40,000 total risk.<p>It doesn’t tell the reader anything about the expiry date or the value of the premium paid, which would be actually useful information.<p>If someone wanted to, they could guess the size of the risk based on the immediately previous 13F filing and comparing what was sold off, but that would be based on too many assumptions to be super useful either.<p>[1] <a href="https://www.sec.gov/Archives/edgar/data/1649339/000090514823000689/0000905148-23-000689-index.htm" rel="nofollow noreferrer">https://www.sec.gov/Archives/edgar/data/1649339/000090514823...</a>
It’s a crapshoot of course, but I tend to agree with a bear case these days. It takes a while for interest rate changes to completely affect the economy and the Fed is still raising rates. Credit card debt recently crossed $1T. Layoffs are still occurring in the tech industry and elsewhere. My thinking is the Fed will overshoot (as it always has historically) with interest rates and when the economy starts tanking like in 2007/2008 they’ll cut back to 0.00 immediately. By then the damage is done, unemployment shoots up, credit defaults shoot up, foreclosures shoot up, and we probably get some deflation.<p>Except for retirement savings, I’m almost entirely out of stocks… not so much because I think it’s downhill from here for a while, but more because my high yield savings account is giving me about 5% APY guaranteed.
<a href="https://whalewisdom.com/filer/scion-asset-management-llc#tabholdings_tab_link" rel="nofollow noreferrer">https://whalewisdom.com/filer/scion-asset-management-llc#tab...</a><p>I'm not an stock options hedge fund trading expert, does he not have to report the expiry date? These have an expiry date right? Or is it some type that doesn't expire?
I still don’t get why he wouldn’t just wait for the crash and then buy the index. Shorting has 100% upside at most and infinite downside. Going long has infinite upside and at most 100% downside. Buffett has gotten pretty rich by buying during crashes, so you can’t say it doesn’t work.
If the market ends up crashing, I think we'd have our 3rd crash in 3 years, which is a little crazy. Also large caps like $META trading like a penny stock where it does it a 3x in 5 months while small and mid-caps are still down since the 2022 crash. It feels weird.
I feel strongly that the stock market is due for a massive crash but I'm also aware of the possibility that some highly connected individuals may find a way to cheat, cover up and censor their way to extend the 'growth' period by some arbitrarily long amount of time by which point my put options will have expired many times over.<p>There is no way that the stock market would experience a massive crash without some serious massive-scale cheating. If this is an extinction-type event, some banks would go rogue and come up with new (possibly illegal) ways to start printing money to prop up the stock market... Given the complexity of the monetary system and correspondent banking, they could keep this going for a while. I mean there are thousands of institutions involved and countless ways to corrupt the system.<p>Our modern system is all made up of centralized databases with thousands of participants trusting each other; trusting the data that all those thousands of distinct centralized systems are reporting and treating them as if they were a cohesive whole... That's our monetary system; thousands of databases managed by different people who trust each other based on what each others' systems are reporting with no way to verify any of those systems.