He may be. We may also only be seeing parts of the trade.
They must be referring the the value of the shares the contracts represent?
To make the math easy, let’s assume it’s a PLTR 200 strike put expiring in February 2026. Each put is $20,000 notional so 10,000 puts would be $200M notional.
Feb PLTR 200Ps are trading for $3k or so each, so it would be $30M in premium for $200M notional with an in-the-money put.
If a market maker sells one 200P (52 delta) they are functionally long 52 shares, so they hedge by selling short 52 shares (or selling a call with 52 delta). If he has 10k contracts then the MM that sold the puts would be functionally long 520,000 shares and would need to short that many deltas to hedge.
Avg recent trading volume for PLTR is ~50M shares a day; 10,000 (50 delta) puts is roughly equal to 500,000 shares and be about 1% of a day’s trading volume.
Tl;dr: He’s holding 10k to 50k put contracts, depending on the moneyness and expiration date.
Puts are calls and calls are puts [1]. On a certain level, all options of a given expiry and underlying are shadows of the same object.
Glad to see someone say it. A lot of people have a hypothesis about the market, but fail to do the follow through to see if the market has already priced that in. The real aim should be to see when your model (mental or mathematical) prices things differently than the market.
In this case, it's actually quite reasonable to believe that the market has over priced the risk no matter how "sure" anyone is that these companies are over valued. It's entirely reasonable to pay for an option that you think reflects an unlikely scenario, but you also believe is mispriced notably by the market.
The relevant Greeks are delta, gamma and vega.
If your bet pays off, the price of the stock will decrease. Delta predicts how your option will increase in value with that; gamma if that relationship will accelerate or buffer. Vega, meanwhile, informs that the price suddenly crashing is volatility, which increases the value of your options.
Succinctly, if you are betting on a crash, options offer advantages. (And if the market, but not your company, gets bailed out, vega could put you middlingly in the black.)
Leverage, margin risk and stock-borrow risk. (The last refers to the folks who lent you the shares recalling them inconveniently.)
Of course they did have a cheaper double no touch broken wing structure that would pay for their next mclaren.
PS. Burry infamously made several more bets after the "big short", bets that misfired. That is, his record is far from being 100% right.
By close though the market they may well all end higher. We seem to live in a meme economy.
To put another way, there's a lot of "potential energy" being built up in the markets right now. That doesn't necessarily mean they'll pop like a bubble - but there's really no precedent for them to continue rising.
General handwavy statements like "there's a bubble" aren't worth paying attention to. Ones with specific timelines attached to it (like the one above, or the article we're commenting on), are worth listening to a bit more, but unless they have the funds to back it up (like Michael Burry has put down here), it's still hot air.
With that said, Burry is often credited for "Calling 18 of the past 2 recessions". Even a broken clock....
The powers that be have too much invested in the market continuing to move up, you are basically betting that Trump, a bunch of billionaires and the FED are going to let the market crash to curb inflation and income inequality. That feels like a bad bet to me.
By their very nature the markets can overwhelm any desire to "[not] let the market crash]"
The stock market isn't that important (though Trump does care about it). It's the bond market that everyone pays attention to when it stops working.
In a sense, stock market crashes are good for young people because you can buy stocks cheaper. In practice this isn't true because too many people are in debt and you get a balance sheet recession.
> Scion bought roughly $187.6 million in puts on Nvidia and $912 million in puts on Palantir, according to Securities and Exchange Commission filings.
But 13F reports the market value of the underlying shares for options, not the premium paid for the options
All we know is at time of filing he has 10k NVDA puts and 50k PLTR puts. We don't know the strike price or the duration or how much he paid
Except it's literally what determines how much money is at risk in the trade. If you buy puts the actual underlying asset value doesn't matter as much as the value of the option itself (which is based on several factors such as time, strike price, etc)
It is the most meaningful thing. It's the exact amount of money you are risking. It's the exact amount you lose if it doesn't strike. If I buy a put for $2, the most I can lose is $2. It's meaningful even with no other information.
13F notional value, on the other hand, is meaningless without more info.
How so?
If I buy TSLA puts at a $10 strike or a $500 strike they show up the exact same on the 13F as both have to be reported as if they are delta 1 when showing a share count.
One is a very meaningful bet and one is throwing money away.
So the claim "$187.6 million in puts on Nvidia" potentially means "Burry risked a total of $18,760 betting against Nvidia" in reality.
What do you mean essentially? That if everything goes south and nothing happens like Burry predicted then the maximum amount he loses is just $18,760 ?
And if that's all that he loses then what's with the big fuss around the news as if it's almost apocalypse incoming with his bets?
This is an argument against a market wide short bet. The Fed could raise the market while Nvidia still loses its premium.
The larger risk is political proximity, particularly with Palantir.
Powell's 4-year term ends January 31, 2026. Whether he is reconfirmed by the Senate for another term is an open question.
Maybe it makes sense based on the dynamic of the Party needing to run through scapegoats? One could possibly see that Palantir is about to be thrown under the bus, but only connected insiders will know who its exact replacement will be? Personally I don't see signs of Palantir being close to the chopping block though.
The Nvidia trade is a rounding error compared to Palantir (which looks a bit oversized given it is 1/400th of the entire market cap)
I've googled "becky with the good hair" [1] and I still have no idea what that sentence means.
I split Becky into two: IBM is Vanilla Becky. Palantir is Becky with the good hair. But don't get it twisted, they are both Becky. Don't fall for Becky.
As far as I can see, shorting Thiel is shorting Israel at the moment. Don't do it while Trump is in Cabinet and pressuring Tel Aviv to pardon Bibi.
NVDA on the other hand ...
What are you going to really do about something that posts 40B+ in revenue every quarter? Okay, you can short it I suppose. You'd have to time it with the expected drop off in AI compute spend, which means if you have a history of being early (which Burry does), you will lose.
Some outlets then took this and wrote the story that Burry has a short bet of billions on NVIDA and Palentir.
His put's are most likely well out of the money so their delta is no where near 1 so his bet is far smaller than places are reporting just due to how the SEC requries funds to report their holdings on 13F filings.
I met a traveller from an antique land, // Who said—“Two vast and trunkless legs of stone // Stand in the desert…
Nobody is accusing the market of behaving rationally
Heuristics That Almost Always Work have a helpful hint right there in the name. They do work, and they do it almost every time. And depending on the topic that 99.99% may be even 100%, but we just can't reliably prove it. Stuff that works 99.99% of the time is very valuable and helps humans free resources and time for the less reliable or more severe problems. Or just for leisure. Personally, I invite author to go disprove every single idea on the internet and do it in careful and deep detail, let's see how long he would last without heuristics. :)
I like to think about it this way: Absent growth, had a private investor purchased the business at 486x earnings, it would have taken the investor 486 years to recoup the investment.
Only crazy-fast future growth could justify that multiple.
I estimate earnings/share would have to grow 30-fold within a foreseeable time frame, like 5-7 years, to justify the peak price per share.[a]
---
[a] Back-of-the-envelope math: 486x peak / 15x long-term average P/E = 32-fold increase to justify valuation. I rounded it to 30-fold.
You have to look at the cost structure now v what it should be in a "steady state" situation, perhaps 10 years out.
How many bad predictions does he need to make before people stop caring what he has to say?
Also, his returns aren’t really impressive compared to VTI, which has had an annualized return of 14.04% over the past 10 years according to Vanguard. That works out to 372% total returns in that period.
It’s easy to make money when even the broadest US index fund is up by that much.
There are also other factors that affect Nvidia. Any move on Taiwan can collapse Nvidia's price down to zero. Hyperscalers can also shift orders over to AMD, Intel, ARM and Broadcom. This is inevitable, but you can't be too early with this.
Lastly. I don't know how technical Burry is. If you showed him LLM tech in 2017, would he have recognized it? There are things about this tech that he may not even recognize even if you showed it to him. You can literally show some people full generated video and they still wouldn't get how much compute it takes to do that.
Finally, the world is not just a giant Tulip bubble. There's actually trillions of dollars moving around every day and people innovate and consume. It's not just a giant Ponzi scheme waiting to collapse.
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As for Palantir, as many have mentioned, I would not consider shorting Palantir until year three of this administration. Palantir may lose favoritism with the next administration. Maybe. As we witnessed with the MAG7 CEOs, these people are prepared to change their entire value set to win the business of those in power.
He's not shorting this time. He has put options. This is a "short position" i.e. one that behaves inversely to the stock price, but his downside is limited (at the expense that he pays the full downside up front, and can lose money even if the stock goes down, if it doesn't go down by enough).
TFA says the options are on "roughly 1 million NVDA shares worth $187 million", implying NVDA was around $187 at the time of acquisition. That more or less tracks with the September 26 close, and this was apparently disclosed in a September 30 filing. NVDA is currently above $200. Similarly, he would have options on PLTR bought when that was also somewhere around $182 (roughly matching the September 30 close); even with today's crash, the stock is hovering around $190 as I write this.
So depending on the duration of the options there's a pretty decent chance he's going to lose money, and depending on the strike price it might well be the entire premium. As far as I can tell, neither of these is disclosed in the filing.
AI is not the only way to address challenge that it aims to solve.
people need basic options education..
GPT-4 was released in early 2023. Back then AI maximalists were saying AGI is near. We're approaching early 2026 and we obviously aren't anywhere close to anything any reasonable person would consider AGI. But what do we have? "Agents" that are mostly useless. Image and video clip content generators that are pretty much only good for social media memes and spam. We do have better software development tools, but that's not a life changing advancement.
It seems like in order for all this speculation and all these massive build-outs to pay off we're going to need AI to redefine how we work and live within the next 3-5 years. Even if we AI development doubles or triples what it's been able to do in the last 3-5 years, I don't see this happening.
So, when this does not happen, when the AI hype does not live up to the promises, by a longshot, what will happen to the markets?
If any anthropic reps read this, I think you guys, while probably better than open AI and meta, possibly Google, are delusional and are more likely to destroy the world than create infinite human life.
You would expect that with low probability, highly leveraged bets, which shorts largely are. You are wrong most of the time and then make a giant pile of money when you are right. People definitely should understand that strategy though and not just follow him blindly into investments without the expectation that you will probably lose your money almost every time.
Has it? I couldn't find the returns for his fund. Since you have them can you post them and highlight what about them are horrific?
- In May 2021, Scion disclosed it acquired put options on Tesla shares.
- In August 2023, it was reported Scion anticipated a stock market crash and acquired $1.6 billion worth of put options to bet against the ETFs that tracked the S&P 500 and the Nasdaq-100.
- Scion also was noted to have held a large put option against the iShares Semiconductor ETF.
The news is essentially about making a bet, as the title suggests, with no real evidence or information on who will pull the money out or how it will happen. Just because the price is high doesn’t necessarily mean there will be an outflow. It’s more like gambling, based on speculation rather than solid facts.
This is a horrendously inefficient system. 90,000? 400,000? In a population of 16 million? The expense! The time! The sensitivity to data irregularities! The friction which the non-dissidents must feel! This is a worse imposition than an occupying army. How many of those 250,000 were actually conspiring against the state in a meaningfully threatening way? 1/10th? 1/100th? How many actual dissidents make it through the sieve, because the security service was unable to cross-reference suspicious entries on three pages in files occupying different filing cabinets in different buildings in the complex?
The US, despite its military might, rapidly hit a manpower limit in the occupation of Afghanistan & Iraq, and was largely unable to effectively fight a collection of counterinsurgencies and "sympathizers".
In the 2020's we have much greater capability to surveil. We have electronics tracking everything, we have phones that listen all the time, we have cameras at every streetcorner, data brokers know more about us than our diary does. But manually checking these things in untargeted surveillance would be almost impossible. It would take our entire population spying on ourselves.
Enter Palantir. Proposition: "We would like to explore if we could make this possible & efficient, using modern database & machine learning techniques. We will collect, categorize, transcribe and cross-reference all the data, of every type, we will generate suspicious activity reports autonomously, we will make follow-up trivial".
This was literally George Orwell's nightmare in 1984 - that looking back at the long history of repression and rebellion, the cycle of violence and freedom, of authority and abuse of authority, that perhaps at some point, eventually, technology gives so much power to the authority that it's simply impossible to overthrow them.
They think hard about how to collect and make use of, what most would describe as, grains of sand.
A common use case for their data is figuring out for a government who they should kill that week.
He’s making calls that things should crash but somehow, here we are.
Real people have no need for high level financial concepts like that. The stock market should be for real trade, not incestuous exchanges between egregious executives.
This is a pretty huge assumption with no real reasoning. Some substance regarding _why_ “high level financial concepts” produce nothing of value would be useful
It's far more complicated than you make it sound.
Could be overvalued, but it is not vaporware.
Which is wrong.
Now, now. Palantir received social security from In-Q-Tel during its incubation. Alan Wade was the CIO of the CIA and had previously founded Chiliad with Christine Maxwell (sister of that Maxwell).
On the other hand, Karp knows Lutnick (who lived next to Epstein) from Haverford College. It's a small world. So with this administration bets against Palantir might be risky.
But "the most important software company in America"? Please, many here have said that it started out as a database search company (like Chiliad).
“I love the idea of getting a drone and having light fentanyl-laced urine spraying on analysts that tried to screw us,” he said during a talk in New York to promote his new book in February."
https://www.ft.com/content/64a2345e-3961-4d5d-ae04-82d933fa5...
But Nvidia seems highly risky to bet against. Also a very high P/E ratio, but not too crazy. And the demand is extremely real and keeps growing.
Until the latest earnings, all the hyperscalers were basically telling us quarter after quarter that they were capacity constrained and backlogged largely due to AI workloads. And capacity generally translated to GPUs. Only now has MSFT reported being constrained on power, which might signal a shift.
But that doesn't mean lower demand, it just means folks lower down the totem pole can finally get their hands on GPUs. Large sovereign nations, including US and China, are jockeying over these things.
Even if this bubble pops, I still don't see demand going down. If you look honestly for indicators, there is tons of data showing rocketing usage which is translating into real productivity wins. In a capitalistic world, that dependency is going to be impossible to wean off of.
I also don't see any real competition on the horizon yet. I kinda understand NVDA's moat is more than just their chips, it's also the ecosystem. I don't claim to deeply understand this (as another comment points out: https://news.ycombinator.com/item?id=45826309), but there are other signs I see:
1. Huawei was forced to train their models on non-Nvidia hardware, and they couldn't get a single training run completed, AIUI due to showstopping bugs and other issues in the stack.
2. Anecdotally I hear AWS has been unsuccessfully trying to get customers to use Trainium. They all prefer Nvidia.
3. Google announced OpenAI would use TPUs on GCP and now is leasing Nvidia capacity from Coreweave to support the deal.
With everyone locked in a Red Queen's race to train the most powerful models ASAP, they can't afford any delays inevitably introduced by new platforms.
The real threat right now is that behind all the smiling partnership announcements, everyone is trying desperately to diversify away from this monopsony. They will eventually succeed, but doesn't seem it will happen anytime soon.
You need to time the crash. If you're off, it could still crash and you could spend more money sustaining the position than you'd make. Or you could end up getting margin called, not just by semi-impotent private investors as Michael Burry was, but by the platform you're trading on itself. "You've lost too much money so far based on the current valuation, so we're going to seize this option and you'll owe us the balance". Trading at high leverages with Daddy's money, people on /r/wallstreetbets sometimes get margin called and end up owing much, much more money than they put in.
Before putting any money in, make damn sure you're able to write at least a 101-level summary of the different types of trades.
I did this in February 2020, and then bet a modest amount on the proposition "People keep saying that COVID isn't going to be a big deal, and I think they're very wrong". I still managed to lose out because I didn't foresee the Federal Reserve bombing the market with freshly printed cash. I lost it all. But what I didn't do, is end up owing millions of dollars I don't have to the brokerage, because I stuck to buying put options rather than selling call options or shorting stocks outright.
Timing aside? To what extent the Federal Reserve would intervene in an NVDA price collapse is an open question, because at this point a collapse in AI investment would threaten the solvency of entirely unrelated financial institutions.
Fixed down side, upside is $100 per contract per dollar the stock is below the strike at expiry. You can also sell them before then, and price depends on time to expiry, volatility, and distance to the strike price. See Black-Scholes model for more info.
> If you're off, it could still crash and you could spend more money sustaining the position than you'd make.
And in Black Scholes this is called Theta Decay. In any form of short, there are maintenance costs, and maintenance costs roughly scale with the risk-free interest rate (usually assumed to be roughly the Federal Reserve's overnight lending rate)
Theta Decay is above-and-beyond the risk-free rate because you're also losing time-value. So you must always factor in the amount of time before a predicted crash: the longer it takes the more money you lose.
“Markets can remain irrational longer than you can remain solvent.” ― John Maynard Keynes
> Or you could end up getting margin called
Completely false
Buying puts is a short position and does not require any further maintenance costs
Yes, theta decay is a thing but stating you can get margin called or there is any level of maintenance required is completely wrong and shows a total lack of understanding of the very basics of options
If everyone followed your advice no one would ever do anything, as we all begin somewhere, something that should OK.
Of course, don't do million dollar trades when you begin, but we shouldn't push back on people wanting to learn, feels very backwards compared to hacker ethos.
Note: you pay overnight swap fees or similar for holding a position. "The market can stay irrational longer than you can stay solvent."
https://www.investopedia.com/ask/answers/06/sellingoptions.a...
You either sell the stock short or buy puts.
is my understanding right?
I make a PUT option on a stock for a price. This price is usually lower than the current market price of the stock.
1.When I do that, the premium amount is to be paid by me when i make the PUT option or I get paid while making the PUT option.
2. Do I have to pay upfront money before hand, while making the PUT option?
3. Is there a deadline for my PUT option. For example, if it doesn't happen, what form of loss do I experience?
If you are having to ask an LLM how to do it, I strongly suggest NOT starting with shorting.
Ask about Put options, which is what Burry is doing here — not even Burry is shorting for this situation.
I'm no expert trader, but the potential losses for shorting are unlimited. You borrow X shares of a stock, and will have to repay your loan in that stock, whatever it costs. If the trade goes against you, you will get a margin call and will need to (re-)fill your account with whatever funds are necessary to pay that amount, or all your other holdings and that position will get sold automatically at whatever that loss amount is. Situations called a "Short Squeeze" arise not infrequently, and even though they are temporary, they can cause a stock price to skyrocket, specifically because so many people are shorting it, and everyone needs to buy to fill their short positions & margin calls. The fact that the price soon falls again helps you not one bit. Plus, the maximum profit is limited to the value of the short. E.g., you short the stock at $100/share, if the company goes bankrupt, you can repay the shares for $zero, making $100/share; but you could lose $1000/share if it goes up 10x.
In contrast, purchasing Put options, the right to sell the stock at a certain price, limits your loss to the cost of the Put options — if your idea turns out to be no good, it just fails and expires worthless.
Here's some MUCH better information:
Former options market maker here. Please don’t buy options as a retail investor. (Maybe write to generate income.)
I mean, lets say I evaluate a company, and I know what its worth is. Then I put a bid.
So he bought (he's long on the PUTs) 10 000 PUTs on NVDA and 50 000 PUTs on PLTR. I don't know at which expiration dates nor at which strikes.
A PUT option can be either a bet (like in TFA) that an underlying shall go down below a certain price before a certain date of it can be an hedge when you own the stock, believe it could go up some more, but also want to be protected should it crash. Now of course hedging has a cost and it's not cheap: an option is an insurance. Even the terminology is the same: the buyer pays a premium and the seller (i.e. the one selling the insurance) collects that premium.
Now if you want to learn about full-on degenerate gambling, these last years there's been an explosion in "0DTE": options with zero day to expiration. Because they're 0DTE, there's very little "extrinsic" value in these. So it's a "cheap" way to get basically 100x leverage (either short or long).
Here's a small documentary of 5 minutes about 0DTEs:
But the risk profile of options depends on more than date to expiration. Of course the strike prices matter, as well as the rest of your portfolio. The real "degenerate gamblers" are taking that leverage without compensating for it. But for example, holding something with 100x effective leverage can be balanced out by only putting 1% of your portfolio there and keeping the rest in cash. (This will generally be inefficient and there's a high chance you won't do as well as just holding the underlying.)
It doesn't matter if it's the best firm ever and will get its dividends forever. You still calculate reasonably.
People say this kind of thing about Tesla as well, and Tesla has been stuck as a slightly-smaller-than-Mercedes-Benz sized firm for years and will stay like that forever, or even shrink relative to MB.
NVIDIA has a much more reasonable P/E ratio, even though it is of course very high.
I'm old enough to remember it being impossible to imagine a world without the USSR in it.
Both companies are growing revenue at a similar rate (~50% YoY), and Nvidia has a higher net margin, however Palantir's share price is up 717% over 18 months, whereas Nvidia is only up 124%.
It's hard to argue Palantir's valuation reflects its fundamentals, even if you believe Palantir will be benefit from lucrative government contracts for years to come.
Buying companies at 80x revenue has not historically been a great way to make money, unless they're growing revenue at several hundred percent per year.
That margin call could obliterate him.
Also, this is not an argument in favor of Nvidia or Palantir.
The sources I can readily find put Burry's current net worth in the neighbourhood of $300 million. Depending on the regulations, he probably actually could put his entire life savings into a short of this magnitude. Of course, that's sort of like having your entire 401(k) in a -4x levered ETF, even worse because it's on individual stocks.
The filing doesn't appear to disclose strike prices or expiration dates. But my guess is that he loaded up on very cheap puts (low strike price) to hedge against the apocalypse (low probability of winning big to cover losses from everything else; high probability of just paying some insurance money). The same form shows bullish positions in other sectors — health care, finance and energy, as well as some corporate bonds. Given what the portfolio in the filing looks like overall, it's hard for me to imagine him being willing to risk more than a few million on this.
It was nice to read a thoughtful reply for a change, lol.
