Comment on 'Big Short' Michael Burry bets $1bn on AI bubble bursting | LBC
ragebutt@lemmy.dbzer0.com 1 day ago
Expiration and strike price were not shared so unclear what his play is. For reference “the big short” was about 1.3 billion in total placed in 2005-2006 with an expiration around 5 years later around 2010-2011. It was somewhat standard for burry/scion capital and possibly still is so they could be playing this assuming the bubble will pop no later than 2030 (and paying 10s of millions a year to maintain those contracts) or they possibly have data to suggest an earlier expiration is worthwhile. They obviously won’t share this and public disclosures aren’t required
null_dot@lemmy.dbzer0.com 1 day ago
What’s an accessible way for a non-wealthy person to bet against the AI bubble?
Yes I understand that this is tantamount to gambling.
ragebutt@lemmy.dbzer0.com 22 hours ago
Puts on nvidia and palantir is what he bought, basically, with palantir:nvidia at 8:2 ratio so he has far more confidence palantir will blow up (in a bad way).
Note that if you don’t know what this means, or if your only knowledge of “buy puts” is buying them via an app like robinhood, keep in mind you don’t know nearly enough about the risk involved and this could blow up in your fucking face real bad.
Especially in the unlikely scenario AI crashes extremely hard (eg palantir goes to 0) and you have a naked put - using today’s closing price of $190 if you chose a strike of $180 your max profit is $285 per contract but your max theoretical loss is like 18,000 per contract if it drops to 0 (again, unlikely, but a more realistic scenario wherein it drops to say, $150 - you’re out almost $3k per contract).
Options that are safer if you don’t want to get this involved in what is ultimately literal gambling: take a degree of separation. Instead of puts directly on nvidia or palantir puts on qqq, xlk, aiq, or some other etf that is made up of AI bullshit. Spreads risk but limits payoff. Use the strategy this nerd used: long dated puts. Keep in mind this is more expensive up front and for the retail investor you’ll generally max out 6-12 months realistically. He did 4-5 years out but that came with additionally complexity (especially for the billions in contracts he held) which meant tens of millions in payments to secure the contracts each year, which made his investors furious (though they ended up eating shit because he made them 730 million and over 100 million for himself on top of that).
Just keep in mind that options trading has ruined many people who know what they’re doing and it’s ruined way way more who have no fucking clue but think they do (I’m in this category). For every dipshit that makes millions off of gamestop there’s probably a hundred people or more like the people from reddit that post shit like this Image
Don’t end up like that person. There are so many of them on reddit. They succeed with a few trades, get up 5k, 10k, 50k, then get greedy and have mad hubris and believe they’re now “elite traders” so they piss it all away, often in a handful of trades over a few days/hours because the loss causes them to panic and try to recover with foolish long shots. The sad thing is you’ll read some where it’s like “I’ve been poor my whole life and I finally got a 30k inheritance, got it to 45k” and then a screenshot like that where they pissed it all away in a day to functionally hand it to some 1%er nepo baby hedge fund manager who is worth 15 million and has never wanted for anything in their life. Then they talk about all the debt they could’ve paid off and it’s like “what the fuuuuuckkk duuuudeee”
Don’t buy naked puts and absolutely do not ever buy naked calls, which have unlimited risk, though I don’t know why you would in this scenario (or ever really). If nothing else please at least read this part.
gravitas_deficiency@sh.itjust.works 20 hours ago
Yeah, WSB was wild in its heyday. The loss porn was crazy.
Rai@lemmy.dbzer0.com 9 hours ago
GME completely ruined WSB.
MacFearrs@lemmy.dbzer0.com 18 hours ago
While I don’t think it’s good to encourage what is basically glorified gambling, it was mental to watch from the sidelines the crazy shit people did on there pre-GME. After that it all went a bit conspiratorial and “get rich quick!”…
Atlas_@lemmy.world 15 hours ago
What?
Lot of confusion in this post.
Buying a call or a put always has limited downside, which is the amount you used to purchase the contract. Now, it’s still super easy to lose your shirt, but far from the “infinite loss” parent mentions.
It is much riskier to sell options. Don’t sell options. The one scenario that possibly has “infinite loss” is if you SELL a naked call. Many brokers will not let you do so.
But most of that is besides the point. The way that you would make this play as a retail investor is buying puts. On Nvidia or what you expect to crash directly. If you think the whole market, then SPY. DO NOT BUY OPTIONS ON ALREADY-LEVERAGED INSTRUMENTS LIKE QQQ. It doesn’t work out like you would hope - it’s not extra leverage, you just get eaten by decay.
harmbugler@piefed.social 19 hours ago
I don’t follow your reasoning on large losses when buying options, even naked ones. When you own an option you have a right but not an obligation. Do you mean selling options?
regedit@lemmy.zip 18 hours ago
I think they meant selling, yes. But also, most brokers for the commoner won’t let you trade options without specific interest/understanding, yet alone sell naked options.
mormund@feddit.org 1 day ago
If you have positions in companies that are overvalued due to the AI bubble, you can sell them or better yet place a stop loss. That way you can still benefit from the bubble further inflating, with less risk that you hold the bag at the end.
Other than that, invest in unrelated companies/ETFs with less weight on these companies. You’ll still crash with the rest of the market but should recover faster than those in the AI bubble.
Don’t try to do anything fancy. You’ll have to gamble to time the pop and even if you’re right, you may still get outperformed by someone with just an S&P500 ETF over that time.
frog_brawler@lemmy.world 9 hours ago
You can’t with any reasonability.
If you want to gamble on WHEN the AI bubble will pop, you buy large amounts of cheap puts on big-tech at a price substantially lower than where it is today.
otter@lemmy.dbzer0.com 1 day ago
If you’re in the US, that’s just part of daily life at this point. Employment? Food? Shelter? Sanity? Hope? 🤷🏼♂️ Pick three, and roll’ em!
massive_bereavement@fedia.io 23 hours ago
For me those stats are very low, can I roll perception instead?
otter@lemmy.dbzer0.com 9 hours ago
Do you want ennui? That’s how you get ennui. (Pfft. Rolling Perception in a dystopian blightmare. This guy. Ha!)
Coldcell@sh.itjust.works 21 hours ago
Animal Handling or Performance, your choice.
brucethemoose@lemmy.world 7 hours ago
Sell your index funds and tech stocks.
Buy Berkshire Hathaway (who’s sitting on a big pile of cash for crash buying, as they do), Walmart, and bread and butter ones, companies that make things folks would still buy in a recession (like groceries).
Don’t mess with shorts. You don’t know when the bubble will burst, and these companies will make you money even if it never does.
PieMePlenty@lemmy.world 23 hours ago
Less risky: sell stock you hold in nvidia or other AI heavy companies. Invest in non AI.
Risk to the max: short nvidia stock. Each month they don’t crash, your wallet hurts.
Just know that Burry is more confident in Palantir crashing than Nvidia (considering how much he’s shoring each).