Fifteen years after his famed bet against the mortgage market led to substantial gains, legendary investor Michael Burry has once again set his sights on a major financial maneuver.
This time, he has taken a “big short” position against the stock market by purchasing an impressive 40,000 put options contracts tied to SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ). The disclosed data from earlier this month showcased a combined nominal value of $1.6 billion for these contracts.
However, it seems that for now, Burry’s short position is at a heavy loss. Notably, a widely-followed stock trader known as Gurgavin on Twitter, revealed on August 27 that Burry is down 42% on his short bet, assuming that the investor is still holding the positions.
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“Michael Burry is now down 42% on his “$1.6 billion” S&P 500 and Nasdaq short if he is still holding it.”
– Gurgavin noted.
Burry spent $26.5 million to build the ‘big short’
It is important to note that, while the combined notional value of the two positions was a whopping $1.6 billion, Burry spent only a minor portion of that figure to build his new big short.
According to Gurgavin’s estimates, the fund manager “likely only spent around $26.5 million to build his $1.6 billion dollar (notional) short position.”
In particular, Burry invested $18 million on 20,000 SPY put options and about $8.5 million on 20,000 QQQ puts, Gurgavin clarified.
There is a possibility that Burry built the two positions as hedges, aimed at softening the blow to his investment firm Scion Asset Management if the stock market declines and its long positions lose value.
On the other hand, the puts could also indicate that Burry is feeling bearish about the two flagship index funds, which are significantly impacted by large-cap stocks such as Tesla (NASDAQ: TSLA) and Nvidia (NASDAQ: NVDA).
Meanwhile, it should be emphasized that it remains unclear whether Burry is still holding the two contracts, given that there’s been no update on his holdings data since June 30.
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