Feinbold extensively discussed Michael Burry’s attention-grabbing $1.6 billion pessimistic wager that shook the financial world in August.Thank you for reading this post, don't forget to subscribe!
Burry’s daring move comprised of 40,000 put options, a substantial investment targeting the wider US stock market, including several prominent equities. Initially, when the market experienced a rally in the early weeks of September, traders and analysts doubted the wisdom of his strategy.
However, recent market turmoil has significantly boosted the value of Burry’s put options, potentially reigniting the debate about his exceptional foresight and causing many to ponder whether his controversial predictions, one of which might come true again.
Supposing he still holds it, Burry’s pessimistic investment is tied to the SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust ETF (QQQ) – two prominent exchange-traded funds (ETFs) that track the S&P 500 and Nasdaq-100 index’s performance.
Despite the initial rally, these two ETFs have considerably depreciated in value since Burry’s pessimistic wagers were revealed in a regulatory filing on August 14. Notably, the SPY and QQQ have declined by 6.8% and 5.4% respectively since then.
This bodes well for the hedge fund manager’s put options because as the value of the underlying stock decreases, the value of the put options increases.
Put options grant holders the right to sell those shares at a higher strike price, which becomes more valuable as the market price falls. The difference between the market price and the strike price represents the profit.
Is Burry’s pessimistic investment currently profitable?
Although the price of the underlying stock is the primary factor influencing the value of put options, it is not the sole determinant.
As per stock trading expert Gurgavin Chandoke, Burry’s massive investment is presently down 38% compared to the stock market.
Michael Burry is now down only 38% on his “$1.6 billion” S&P 500 and Nasdaq short if he’s still holding it
Based on the same estimates https://t.co/Op16uzoMG5
-Gurgavin (@Gurgavin) 25 October 2023
Assuming he still possesses them, Burry expended approximately $26.5 million to construct his downfall, which is estimated to have a value of $1.6 billion, according to Gurgavin’s assessment.
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