No, Michael Burry Didn't Risk 93% of His Portfolio on Put Options

No, Michael Burry Didn’t Risk 93% of His Portfolio on Put Options

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Yesterday, 13-F filings from Michael Burry were released (which indicate position ownership as of June 30th). Michael Burry is widely known for predicting the 2008 subprime mortgage crash, made popular by the movie “The Big Short.” When social media got hold of the 13-F, users quickly parsed the data, hastily drawing the conclusion that Michael Burry had bought 2 million contracts of SPY puts, and an additional 2 million contracts of QQQ puts, for a combined total of over $1.6 billion dollars, or 93% of his portfolio. 

Sources: CNN.com, Moneycontrol, @burrytracker, @ripster

Here’s the problem: That math is incorrect. First, according to Whale Wisdom, Michael Burry’s Scion Asset Management’s entire AUM is $237,971,170 — significantly less than the $1.6 billion cited. Michael Burry did buy puts in the SPY and the QQQ, but the $1.6 billion noted is notional value, not present value. Notional value in 13-F filings reveals the maximum possible value of the options — meaning a put bought at the $400 strike has a notional value of $40,000 — that’s the maximum value that the put could reach. With that said, that put option could have cost the user a significantly smaller premium, depending on how far out of the money it was, and the expiration date. Additionally, the 2 million units represented in the 13-F were listed in share-equivalent, not option contracts. Because option contracts represent 100 shares of a stock, that 2 million units actually represents 20,000 option contracts in each ETF — 40,000 total. 

While this trade was still notable, and 40,000 contracts is still a very large trade, it’s worthwhile to note that this likely represents a fraction of the 93% portfolio weight originally reported by several social media names and websites. Additionally, 13-F filings can be tricky to trade on — because this represents ownership as of June 30th, these puts could have already been sold, rolled, or even added to. We simply will never know what Michael Burry was holding on August 14th, the day of the 13-F release — the closest we’ll get is seeing Burry’s next 13-F filing, which will be released months from now. 

With that said, Market Rebellion did witness a massive set of puts purchased in the SPY last week.

19,500 put options rolled down in the SPY, expiring in October at the $426 strike, bought for $5.30 per contract. This represents a premium paid of $10,335,000 — much closer to the dollar value that Burry has traded with in the past. Additionally, in the same trade, we noticed a roll-down in 24,000 of the September SPY options, bought for $2.85 per contract, representing a premium paid of $6,840,000. While these trades are similar in quantity and style to the trades held by Burry as of June 30th, we will likely never know whether these were actually him. Regardless, there’s one thing we can know for sure:

There is at least one trader willing to bet millions of dollars on an upcoming downturn in the stock market, and they’re using put options to do it. 

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