Burry Was Long 8,001 Tesla Puts as of End of Q1/2021

The media had a field day reporting on Michael Burry's reported $500 million short position of Tesla.

Burry, who was immortalized in the movie "The Big Short", purchased 8,001 puts on Tesla sometime in the first quarter of 2021.

According to his firm's 13F filing, the nominal value of Burry's puts was over $530 million as of the end of Q1/2021.

The media breathlessly reported this number, with many claiming that Burry's $1 billion+ hedge fund had roughly 40% of its money tied up in a Tesla short.

The reality is that Burry almost certainly has a fraction of this amount at risk.

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When reporting their 13F filings, hedge fund have to report the nominal value of their options holdings.

To get that number, they are instructed to use this formula:

Number of Calls/Puts * 100 * Quarter End Closing Price of Underlying Security

So, in the case of Michael Burry's quarter-end position in Tesla puts, the formula would look like this:

8,001 * 100 * $667.93

Voila! You have a reported position of over $530 million.

The reality, however, is much different.

To start - we don't know the strike prices or expiries that Burry used for his position.

Let's assume that Burry was REALLY bearish and decided to buy 8,001 $100 Tesla puts that expire in a year from when he initiated his position.

That trade would cost Burry a little over a million dollars - a far cry from the $530 million position that was reported by the media.

If Burry entered using a strike price that was roughly half of Tesla's current price, the position likely would have cost Burry's fund roughly $15 million or so.

A sizeable position, to be sure, but still only about 1% of his fund's total assets.

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The beauty of options is that they provide sizeable leverage while still being able to define your risk beforehand.

If you think that Burry was getting crushed by Tesla's rise to start the year, think again, as he likely had far less at risk.


Filed under: General Knowledge