Yes, Burry Is Short. But There Is More To It Than The Headline
Look past the fear-mongering headlines, and we get a clearer understanding of Michael Burry's true position, both long and short in the market.
It’s been all over our Twitter (or X) timeline. “Michael Burry just bet $1.6B on a stock market crash.” But this is a very misleading story, with several facts left out. If we look past the headlines, some questions need to be considered about this position.
First, let’s clear up the ‘$1.6B’… because Michael Burry’s firm doesn't even manage $1.6B in total. Their previous filing showed just $106M invested.
The number you see on Michael Burry's 13F is the notional value of the options he owns, which can be misleading because it's often a much larger number than the amount at risk.
The billion-dollar breakdown
Scion Asset Management's filing below shows SPY (S&P 500 ETF) put options with a market (or notional) value of $886M and $739M in QQQ (Nasdaq ETF) puts. This doesn't mean he's spent $1.6B and that money is at risk if he is wrong. This figure refers to the market value if you were to convert all those options into shares of the underlying asset. In this case, SPY and QQQ.
(A quick note of how an option works for any readers that don’t know: A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date. There are two types of options: puts, which is a bet that a stock will fall, or calls, which is a bet that a stock will rise.)
The filing mentions “two million shares held.” This is another comment used as a catchy headline. 13F filings represent options as if you converted contracts into shares. Therefore, $886,560,000 in market value with SPY's closing price on June 30th ($443.28) gives you two million shares.
So, what is happening?
One put or call option equals 100 shares. We can do some quick math here. 2,000,000 / 100 = 20,000. So, all we really know is that Burry has twenty thousand put contracts.
In the rest of this article, we’ll look into some questions to consider and speculate about.
How much was paid per contract?
What are the strikes and expiries for each asset?
Is he even still in the position?
The stocks Burry is buying right now.