To The Moon

“The Big Short” investor Michael Burry had a bet against tech giant Apple in the first quarter. He revealed last year that he is no longer shorting Tesla, he shifted the target to Apple.

The Big Short 

Michael Burry

Subprime Mortgage Crisis

Burry, one of the first investors to call and profit from the subprime mortgage crisis. 

In 2005, Burry started to focus on the subprime market. Through his analysis of mortgage lending practices, he correctly predicted that thereal estate bubblewould collapse as early as 2007. His research on the values of residential real estate convinced him that subprime mortgages, especially those with"teaser" rates, and the bonds based on these mortgages, would begin losing value when the original rates were replaced by much higher rates, often in as little as two years after initiation.

This conclusion led him to short the market by persuading Goldman Sachs and other investment firms to sell him credit default swaps against subprime deals he saw as vulnerable. 

Eventually, Burry's analysis proved correct: He made a personal profit of $100 million and a profit for his remaining investors of more than $700 million. Scion Capital ultimately recorded returns of 489.34% (net of fees and expenses) between its November 1, 2000 inception and June 2008. The S&P 500, widely regarded as the benchmark for the US market, returned just under 3%, including dividends over the same period.

$Tesla Motors(TSLA)$

Burry initiated short position on Tesla before or around early December 2020 and likely added to his short positions after the market cap of Tesla surpassed that of Facebook. Burry predicted Tesla stock would collapse like the housing bubble, saying that "my last Big Short got bigger and Bigger and BIGGER" and taunted Tesla bulls to 'enjoy it while it lasts.' 

In May 2021, it was reported that he held puts on over 800,000 shares of Tesla. 

In October 2021, after a 100% rise in Tesla's stock value, he revealed he was no longer shorting it.

$ARK Innovation ETF(ARKK)$

During the second quarter of 2021, he has reported to hold puts on almost 31 million dollars on ARKK ETF innovation index managed by Ark Invest.

$Apple(AAPL)$

He owned 2,060 put contracts of Apple at the end of the first quarter. Each options contract is tied to 100 shares of stock, so Burry’s bet was tied to 206,000 shares of Apple stock, which had a notional value of $36 million at the end of March.

A put options contract gives the owner the right to sell a security at certain time for a certain price and so it increases in value if the stock declines below the so-called strike price. For More Options content: @OptionsDelta @OptionPlus

If Burry held these put options through the current quarter, the bet would be profitable as Apple has dropped 15% in the second quarter so far.

To be sure, Burry is a very active trader and he could have exited this position by now. The investor had previously owned put options against Tesla and he said that it was “just a trade.”

Other than the Apple bet, the founder of Scion Asset Management added a slew of long positions in the first quarter across different sectors, including $Booking Holdings(BKNG)$ $Alphabet(GOOG)$ $Cigna(CI)$ $Ovintiv Inc.(OVV)$ and $Nexstar Broadcasting(NXST)$.

SHARE YOUR THOUGHTS

Apple's Bulls vs. Bears: Who Is Right?

You may be rewarded with Tiger Coins for sharing your thoughts in the comment💸💸💸

Follow me! Don't forget I am the richest tiger in this community😎😎