"Big Short" Investor Michael Burry Owns 8,001 TSLA PUT Contracts In Bet Against Tesla

Burry has a huge bet against Tesla. Let's go over how big as well as very inaccurate reporting on the bet.
Publish date:
Tesla, Where to From Here

Huge Bet Against Tesla

CNBC Comments Michael Burry of ‘The Big Short’ reveals a $530 million bet against Tesla 

Burry does have a huge bet against Tesla, but the article itself is terribly inaccurate.

Famed investor Michael Burry on Monday revealed a short position against Tesla worth more than half a billion, in a regulatory filing.

Burry, one of the first investors to call and profit from the subprime mortgage crisis, is long puts against 800,100 shares of Tesla or $534 million by the end of the first quarter, according to the filing with the U.S. Securities and Exchange Commission

Valuation Fact Check: False

Valuation Statement: "Short position against Tesla worth more than half a billion"

Burry owns 8,001 put contracts strike price, or expiry, according to the filing. What price Burry paid is unknown. The target PUT price is also unknown. The current value of the PUTs is unknown.

Buying 1 PUT represents the right (but not the obligation) to sell shares at the specified price. 

8,001 PUTs would give Burry the right to sell 800,100 shares of Tesla at an unknown price. 

Assuming TESLA went to zero (it won't), and assuming the PUT strike price on all the PUTs was $700 (again false), one can calculate $700 * 800,100 = $560,070,000.

But that calculation (over half a billion) is total nonsense. 

Sloppy Writing

The article noted Burry was "long puts against 800,100 shares of Tesla."

When a friend emailed that statement, it read like a hedge.

Long PUTs "against" shares could be interpreted as a hedge (i.e. long stock and long PUTs).

"Long PUTs "on" 800,100 shares of TSLA" accurately describes the bet.

Value at Risk

We do not know what the strike price, nor the price paid, nor the strike dates.

Because of the lack of details, we do not know for sure if Burry is even ahead in the trade despite the decline. 

I suspect he is well ahead, but that is an unknown given time decay on options.

A Word About Timing

Inaccuracies aside, Burry did make a big bet against Tesla and I agree with his reasoning regarding tax credits, profitability, valuation, etc.

However, one could have provided the same reasoning a year ago, been correct on rationale, and lost the entire bet.

So far, it appears Burry has excellent timing.


Initiated a Short Position in Tesla Yesterday: Luck of the Draw Interview Today

I initiated a short position in Tesla yesterday, via PUTs. The NYT stock-sinking interview with Musk today was luck.

Exploring Tesla Share Price vs Short Interest

On June 17, Kusk Tweeted "Shorts have about three weeks before their position explodes." Let's track short interest.

Gundlach: "Bet Against Bitcoin and Make Money"

Jeffrey Gundlach, chief executive officer of Doubleline Capital LP sees Bitcoin as the "big rock of silly season".

Tesla's Bizarre Conference Call: Musk Went After Analysts and His Own Execs

Tesla's conference call on Wednesday gets a 10-bowl popcorn rating.

Exploring Tesla's Mountain of Debt: Musk Needs to Pick a Poison

Let's explore Tesla's mountain of debt with a spotlight on convertible bonds.

Tesla's Hail Mary Play and Convertible Bond Hokey Pokey

Elon Musk's Tweet about going private was likely an act of desperation. Tesla will not meet stated profitability goals.

Fed-Proof Bond Bet?

The yield curve is the flattest since 2007. Nonetheless, traders think it will get flatter. The bond bet du jour is the next Fed chair will keep hiking but not as much as the Fed thinks.

Putting the Cart Before the Horse: Gold Hype

The commercial short positions in metal futures are decreasing. But what's really going on?