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Michael Burry’s $1.6 billion bet at risk as S&P 500 hits 2-month high

Michael Burry's $1.6 billion bet at risk as S&P 500 hits 2-month high 

Michael Burry‘s significant bearish bet against the stock market, which grabbed headlines in August, has taken investors on a wild ride. 

Initially questioned amid the market’s AI-driven summer rally, Burry’s move gained credibility as the S&P 500 plummeted in late October. 

However, recent developments, most notably the new S&P 500 rally this week, have reignited the debate, leaving the iconic investors’s controversial bet once again under scrutiny in the dynamic equity landscape.

S&P 500 almost records historic win streak

Supposing he is still holding it, Burry’s bearish investment with a notional value of $1.6 billion involves 40,000 put options tied to SPDR S&P 500 ETF (SPY) and Invesco QQQ Trust ETF (QQQ) – two well-known exchange-traded funds (ETFs) that track the performance of S&P 500 and Nasdaq-100 indexes.

This means that every time these indexes surge, the returns from Burry’s put options diminish.

Having said that, the S&P 500 has been on a tear this month. Until November 9, the wider stock-market gauge registered eighth consecutive winning sessions – the longest streak since 2021. It climbed to a 2-month high of 4,391, before retreating to close the session at 4,347. 

S&P 500’s performance in the past 5 trading days. Source: Google

If it had risen for the ninth straight day, it would have marked the longest series of gains in almost 20 years. 

US equities staged an impressive rebound from their autumn lows, putting the S&P 500 on track to ink a second consecutive week of gains. 

Several factors fueled this rally. Primarily, the Federal Reserve left rates unchanged once again at its November 1 meeting, raising confidence among investors that no more rate hikes are on the way, at least for the time being.

Additionally, the 10-year Treasury yield had been declining from its record-high levels. Meanwhile, the ongoing earnings season has been largely positive, with S&P 500 giants such as Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Meta (NASDAQ: META) all beating expectations. 

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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