Michael Burry, the money manager made famous in the book and film ‘The Big Short,’ appears to be betting on a major downturn in the US stock market.
Burry held 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 fillings released on Monday.
Burry’s Scion Asset Management bought put options with a notional value of $739 million against the popular Invesco QQQ Trust ETF during the quarter, and separate put options with a notional value of $886 million against the SPDR S&P 500 ETF.
Put options convey the right to sell shares at a fixed price in the future, and such options typically increase in value if the underlying security decreases in value.
The notional value of the put options refers to the value of the underlying securities, but the new filings do not reveal how much money Burry actually put on the line, as they don’t show the purchase price, strike price or expiration date of the options.
Burry rose to fame with his bets against the US housing market before the 2008 financial crisis. Michael Lewis’ nonfiction book ‘The Big Short’ was released in 2010 and the movie version came out in 2015.
Burry also profited in the early 2000s by shorting high-flying tech stocks during the peak of the Dot Com bubble.
However, his bets have sometime appeared to misfire. In late 2020, he initiated short positions against Tesla stock, but later said it was just ‘a trade’ and he’d exited the position after Tesla’s stock continued to soar, according to CNBC.
It was not clear how Burry’s recent options bets against the Nasdaq and S&P 500 had fared, given that regulatory filings do not show the terms of the contracts.
Since the filings disclose only long positions it was also not clear whether the puts were held outright or against other contracts that were held short.
That means Burry’s bets against the market may be part of a more complex trade or long-term strategy that can’t be deduced from the filing alone.
So far this year, the S&P 500 is up roughly 17 percent, while the Nasdaq composite is up nearly 32 percent over the same period.
Outsized gains in a handful of tech megacap companies such as Nvidia and Meta have fueled much of the year’s rally.
Big tech stocks have been fueled by investor excitement in 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 stakes in Chinese e-commerce companies JD.com and Alibaba Group Holdings, as well as regional banks PacWest and Western Alliance Bancorp, the new filing shows.
The fund also increased its holdings in stocks related to oil and gas, media, and travel and tourism.
Among its long positions, the fund more than doubled its stake in online luxury goods market RealReal Inc, which is up nearly 100 percent for the year to date.
It also added new stakes in iHeartMedia, Carter Communications, and Warner Bros. Discovery, among others, the filing showed.
The fund also added a huge new position in Expedia Group worth $10.9 million, and a block of shares in MGM Resorts International worth $6.6 million.