Burry's Bearish Bet Against Tesla ($534 Million In Puts!)

Tesla stock is not doing so well. The price is going down. Growth stocks as a whole are going down. Michael Burry is also betting against Tesla with put options. And, if all of that wasn’t enough, Elon Musk managed to upset basically every crypto enthusiast on social media.

What does this mean for the future of the company? Is this the last drop? Am I finally selling my Tesla shares?

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Michael Burry’s bet against Tesla

Today, we’re having (yet another) look at one of my favorite tech stocks – Tesla. And, well, if I’ve got to be honest, they are not doing so well.

Tesla is down by more than 20% from the start of the year (and more than 35% from its high last February). Now, Michael Burry, an investor known for his ability to predict this sort of market shift, is also betting against Tesla.

However, this time, he’s not shorting. Instead, he went heavy into put options. And let me sneak in a quick quote from a recent SEC filing here:

As of March 31, Burry owned 8001 put contracts, with unknown value, strike price, or expiry, according to the filling.

Essentially we know that Burry is holding put contracts, but there’s no info about the exact details.

Now, I’m not a fan of put options. For me, they’re entirely too risky and stressful. I very much prefer my stress-free, stable, and reliable long-term investments. Some people say that this is a safer approach than shorting outside of a bear market, but I’ve got really no experience with either, so I’m not going to comment on that.

Anyway, here’s a quick, simplified rundown:

Put options are essentially a bearish bet on the stock. If I expect that a stock will go down below a certain price, by, let’s say, the end of the year, I can monetize my assumption with the help of put contracts. As long as the stock stays below my assumed price (strike price) by the expiry date, I’ll be able to make money on the contracts. Of course, there’s a lot more to it than that; there are entire volumes of information and things that you need to know before you can safely get into put options. Or, you could just be Michael Burry, I guess.

In our case, Burry is betting that Tesla will go down in price. And, judging by how things are going for Tesla, he’s probably going to make a ton of money out of this.

As a side-note, short-term moves like these are very, very difficult to time, and it’s really easy to “mess up” and lose a lot of money in the process. The whole “short-term” segment of investing is a big part of why so many people out there have this silly belief that “the stock market is a scam and you’re almost guaranteed to lose money if you play”. Even in this case here, with Michael Burry, who is obviously a top-tier expert – it’s still a bet. He’s betting a lot of money on his guess that Tesla is going to go down. Yes, it’s an educated guess, and, yes, he managed to time it perfectly (so far at least), but it’s still a bet that the market will do a certain thing in the short term.

All of this ties back into why I prefer long-term stability over playing with short-term volatility. Yes, people like Burry can make incredible amounts of money with moves like these. But it’s all super risky, and it looks way too stressful for my taste. I like the stability. I like knowing that, as long as the fundamentals & management are good, the stock will go my way.

It’s not as “quick” as playing the short-term volatility. And the short-term payoff is much smaller. Instead, it’s a waiting game. And, of course, I’m not allowed to play into the short-term volatility by panic-selling because then I am guaranteed to lose money.

But what’s with all the volatility? Why is Tesla getting hit so hard?

Well, it’s a whole laundry list of factors.

When it comes to media exposure and opinions, Tesla hasn’t been doing too hot lately. There’s been a ton of negativity, and stock prices are directly tied to public opinion. First of all, Tesla’s stock skyrocketed last year. It went way high, and there’s got to be a correction. Then, Tesla is also a growth stock. And what’s the trend with growth stocks at the moment? That’s right, they’re falling out of favor. Now, take all of this, add the whole BTC fiasco that happened recently, and you’ve got a pretty good idea of why Tesla stock is taking a nosedive.

I do not believe that this is the end for Tesla, I am not selling out of my position, and I do not think less of Elon Musk’s management abilities. I’m still very positive about the future of Tesla, and there’s no reason to think that their prospects have diminished in the slightest. I also don’t “hate” Elon Musk for saying what he did about crypto, even though I own BTC. Last I checked, he’s not a certified financial advisor. Besides, he’s also entitled to his own opinions about stuff.

And, besides, the energy efficiency issue with crypto mining is very real. If you’re interested, you can go check out the Twitter stuff, but I can save you the time and tell you right now that all you’ll see is just a ton of negativity. Naturally, this negativity will further impact public opinion, which means that the stock could take even more hits. Still, looking at the big picture, I’m not really concerned about the future of Tesla in the slightest.

And, as far as my own shares are concerned, well, I’m not selling, of course. That shouldn’t really come as a shock to my frequent viewers, but I know that we’ve also got a ton of new people on the market who are still trying to get the hang of things. So, here’s my logic:

I’m a long-term investor, meaning that I’m in this for the long run. I bought into Tesla years ago, not because some celebrity or YouTube content creator told me to, but because I did my research and decided that this company can help me make a lot of money. I’ve held on to the position so far, and I’ll keep holding for as long as I can.

And, yes, I know that “it feels bad” to see your position go down. I also went through this back when I was new. But, there’s one vital thing that every long-term investor has to understand and always keep in mind – you are not losing or gaining any money until you sell. If I bought my shares at $10 and then the price goes down to $5, I haven’t actually lost any money until I decide to sell for $5. Likewise, if I bought my shares for $100 and they go up to $10 000, I still have not made a single penny until I sell. It’s all potential returns and potential losses. The real change does not happen until you actually let go of the shares.

If I still like the management, the fundamentals, and the business model, I’ll hold on to my positions. Because the market always balances itself out. The stock goes up? That’s great; it means that the company is gaining traction. The price goes down? That’s even better because I’ll be able to add more to my position while it is undervalued!

Basically, “making it big” with long-term investing can be boiled down to being patient and sitting in your positions for as long as possible. IF, and only if, you still believe that the company has a bright future, of course.

Alright, this blog has been going on for long enough, so let’s wrap it up.

I’m not selling out of my position. Instead, I’m going to keep doing what I always do and keep an eye out for opportunities to add even more Tesla to my portfolio. So, if I see the price going below $500, I’m buying more. If it somehow manages to go lower, well – that’s even better. More Tesla for me!

And, remember, guys – stocks do not accurately show the financial health or long-term prospects of a company. The financial reports, the presentations, and the management do. The stock market just shows you what people think about the company. If people like it, and, more importantly – if the media and the influencers like it, the price will go up. If there is negativity about it, the price will go down. That’s just how it works in the short term. The long-term, on the other hand, does not rely on opinions, hype, or influencers. The long-term is all about the fundamentals and the stats that really matter.

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Burry’s Bearish Bet Against Tesla ($534 Million In Puts!)

Michael Burry’s bet against Tesla

Anyway, here’s a quick, simplified rundown: