Michael Burry, the money manager made famous by the book and movie “The Big Short,” appears to be betting on a major downturn in the US stock market.
Burry had bearish positions against the S&P 500 and Nasdaq 100 Index worth a combined $1.6 billion at the end of the second quarter, according to securities fills released Monday.
During the quarter, the founder of Scion Asset Management bought put options against $739 million worth of shares in the popular Invesco QQQ Trust ETF, and individual put options against $886 million worth of SPDR S&P 500 ETF.
Put options give the right to sell shares at a fixed price in the future. They typically rise in value as the price of the underlying stock falls, making them a defensive bet.
The dollar amounts of the positions refer to the value of the underlying securities, but the new filings do not reveal how much money Burry actually put on the line because they do not show the specific terms of the options he purchased.
Michael Burry, the money manager made famous by the book and movie “The Big Short,” appears to be betting on a major downturn in the US stock market
Christian Bale played Burry in the 2015 movie The Big Short. Burry rose to fame for his bets against the US housing market before the 2008 financial crisis.
Options contracts give the holder the right to buy (in the case of calls) or sell (in the case of puts) a block of 100 shares of the security in question, at a certain price and on a certain date.
Their value can fluctuate rapidly, depending on the strike price and expiration date, compared to changes in the price of the underlying asset.
Burry became famous for his bets against the US housing market before the financial crisis of 2008. Michael Lewis’ non-fiction book ‘The Big Short’ was released in 2010 and the movie version came out in 2015.
He also profited in the early 2000s by shorting high-flying technology stocks during the height of the Dot Com bubble.
However, his bets seemed to fail at times. In late 2020, he initiated short positions against Tesla stock, but later said it was just “a trade” and had exited the position after Tesla’s stock continued to rise, according to CNBC.
It wasn’t clear how Burry’s recent options bets against the Nasdaq and S&P 500 had fared, given that the registration documents don’t show the terms of the contracts.
Also, since the filings revealed only long positions, it was not clear whether the puts were held outright or against other contracts held short.
That means Burry’s betting against the market could be part of a more complex trading or long-term strategy that cannot be deduced from the filing alone.
So far this year, the S&P 500 is up about 17 percent, while the Nasdaq composite is up nearly 32 percent over the same period.
Big gains in a handful of tech megacap companies like Nvidia and Meta fueled much of the year’s rally.
So far this year, the S&P 500 is up about 17 percent and is in a new bull market
The Nasdaq composite is up nearly 32 percent for the year fueled by outrageous gains in a handful of tech megacap companies like Nvidia and Meta
Major tech stocks were fueled by investor enthusiasm for the potential applications of artificial intelligence, as well as the prospect that the Federal Reserve will soon end its inflation-fighting rate hikes.
Meanwhile, Burry’s fund has also liquidated its interests in Chinese e-commerce companies JD.com and Alibaba Group Holdings, as well as regional banks PacWest and Western Alliance Bancorp, the new declaration shows.
The fund also increased its exposure to oil and gas, media and travel and tourism related stocks.
From its long positions, the fund has more than doubled its holding in online luxury goods market RealReal Inc, which is up nearly 100 percent year-to-date.
It also added new stakes in iHeartMedia, Carter Communications, and Warner Bros. Discovery, the filing revealed.
The fund also added a massive new position in Expedia Group worth $10.9 million and a block of shares in MGM Resorts International worth $6.6 million.
Scion Asset Management did not respond to a request for comment.