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“Michael Burry’s Unconventional Bet: Exploring His Bearish Options on Nasdaq”
Michael Burry, famously known for his prescient betting against subprime mortgages during the 2008 global financial crisis, has recently shifted his attention to stocks with bearish options. Burry, a value investor, is known for scouring the stock market for attractive opportunities, but he isn’t always bullish.
This past December, Burry made headlines when he took a bearish position in options on the Nasdaq, using the same contrarian approach he used to successfully anticipate the collapse of the housing market twelve years ago. The Nasdaq was trading at all-time highs and showed no signs of slowing down. Burry invested in put options, which grant the owner the right to sell a security at a predetermined price. The notable investor was betting that the Nasdaq would take a dive sometime in 2021.
The Nasdaq had a good run in the first half of 2021. However, in February 2021, it began to pull back. Burry was proven right, as the Nasdaq dropped from a high of 13,400 to 11,500. Burry’s bearish bet paid off handsomely as he profited from the put options he bought.
Burry’s success with bearish options on the Nasdaq shows how important it is to remain flexible in investing. While Burry is known for his value investing, he is also keenly aware of when a particular asset class may be overvalued, or when the market is set to reverse course. By investing in bearish options, Burry was able to capitalize on a market correction that few investors saw coming.
It’s clear that Michael Burry’s astute analysis and adept timing have allowed him to succeed in his bearish bet on the Nasdaq. His willingness to embrace bearish strategies and his willingness to shift his investing style when needed show why Burry is such a successful investor.Michael Burry, the famous investor and hedge fund manager made famous by the book and movie The Big Short, is back in the news. This time, he is making waves on the Nasdaq with his bearish options activity.
Burry recently amassed a substantial amount of bearish options on the Nasdaq 100 ETF (QQQ), essentially betting that the tech-focused index will decline. These bearish options, which are essentially a bet that the value of the underlying asset will decrease, are based on what Burry perceives as an overly optimistic tech sector that could be in for a correction.
Burry is no stranger to bearish bets, as he famously bet against the housing market using credit default swaps in the mid 2000s. This time, however, he is taking a more direct approach by buying bearish options on the Nasdaq, instead of simply betting against the market through derivatives.
So why is Burry making this bearish bet on the tech sector? In a recent interview, Burry shared his bearish views on the tech sector. He believes that the tech sector is overvalued and that the current levels of market speculation are not supported by fundamentals. He believes that the recent hype around companies such as Tesla (TSLA) is driven by momentum investors, not long-term investors. Furthermore, he believes that many tech companies are trading at unsustainable valuations, and that a correction is in order.
Burry is not alone in his bearish outlook on the tech sector. Other investors such as Jeffrey Gundlach and Howard Marks have expressed similar concerns. However, Burry’s bearish options activity on the Nasdaq suggests that he is taking a more direct approach to betting against the tech sector.
While some may call Burry’s bet contrarian, it is important to remember that he is no novice when it comes to investing. He correctly predicted the collapse of the housing market in the mid 2000s, and his bearish options activity suggests that he may have identified another potential opportunity. While only time will tell if Burry is right, investors should take note of his bearish views and consider whether they should take similar action.