Why Did Michael Burry Exit His Tesla Short Position?

TL;DR

Michael Burry exited his short-term bet against Tesla, but the outcome is uncertain because the put options' strike prices and expiry dates were not disclosed. He began buying puts in Q1 2021, when Tesla traded between $563 and $880 per share, and the stock later declined for much of the period. Read on to understand why the narrator thinks Burry may have profited.

Transcript

was come out in the media over the past week that michael bury has ditched his short position against tesla so another big name investor has tried to bet against elon musk and has run for the exit however unlike many others there's a good chance michael bury got out of this bet unscathed and may have even made a decent profit from it so in this vid... Read More

Key Insights

• 👁️‍🗨️ Michael Burry, known for his prediction of the housing bubble, bet against Tesla with put options, focusing on short-term stock price movement.
• 🍝 Burry's past successes in predicting market trends suggest a potential profit from the Tesla bet.
• 🚙 Shorting Tesla stock is challenging due to the company's future growth potential in various sectors beyond electric vehicles.
• 😨 Tesla's high valuation is a result of its potential in self-driving cars, AI, renewable energy, and other innovative technologies.
• 😚 Short sellers often underestimate Tesla's growth potential and end up losing money due to the company's resilience.
• ™️ Michael Burry's decision to exit the bet against Tesla indicates a likely positive outcome for his trade.
• 🍰 Tesla's stock price fluctuation and industry leadership make it a risky proposition for short sellers.

Questions & Answers

Q: Why did Michael Burry bet against Tesla?

Michael Burry described the position as a trade, suggesting he was betting against Tesla's short-term stock price rather than the company itself. The narrator says Tesla's share price looked worryingly high relative to its current business performance.

Q: How did Michael Burry bet against Tesla?

Burry bought put options tied to Tesla shares rather than short-selling the shares. Put options could make money if Tesla's share price fell below their strike price before expiration.

Q: When did Michael Burry begin buying Tesla put options?

Burry began buying Tesla put options in Q1 2021. During that quarter, Tesla traded between $563 and $880 per share.

Q: How large was Michael Burry's Tesla put position?

The transcript says Burry initially bought puts against 800,100 Tesla shares. His Q2 filing later showed puts against 1,075,500 Tesla shares.

Q: Did Michael Burry profit from his Tesla put options?

The result cannot be determined with certainty because the strike prices and expiry dates were not disclosed. The narrator guesses that Burry probably made money because Tesla declined through much of Q1 and a substantial part of Q2 while Burry treated the position as a short-term trade.

Q: Why is the outcome of Michael Burry's Tesla trade uncertain?

The available filings do not reveal the put options' strike prices or expiry dates. It is also unclear whether the options reported at the end of Q1 were the same options reported at the end of Q2.

Q: Was Michael Burry making a long-term bet against Tesla?

The narrator argues that he was not making a long-term bet against Tesla's business. Burry called it a trade and used options with expiry dates, whereas a short position in the shares could have remained open indefinitely.

Q: Why did Michael Burry exit his bet against Tesla?

The transcript does not provide Burry's exact reason for exiting. The narrator suggests he may have profited during Tesla's decline or recognized the stock's rebound and closed the position, but explicitly identifies this as a guess.

Summary & Key Takeaways

• Who: Michael Burry is an investor known for identifying bubbles and betting against them.

• Number: Burry made approximately $700 million from his bet against the United States housing market.

• When: Burry began betting against Tesla stock in Q1 2021 by buying put options.

• Number: His initial position involved puts against 800,100 Tesla shares.

• Number: Tesla traded between $563 and $880 per share during Q1 2021.

• Number: His Q2 filing showed puts against 1,075,500 Tesla shares.

• Definition: Put options let Burry sell stock at the strike price before the expiry date.

• Compare: Put options supported a short-term stock-price trade, while short-selling shares could have kept a position open indefinitely.

• Definition: The trade's result is uncertain because its strike prices and expiry dates were not disclosed.

• When: Tesla stock declined through most of Q1 and for a substantial part of Q2.

• Definition: The narrator believes Burry may have profited, but clearly describes that conclusion as a guess.

• Who: The narrator says Burry had previously spoken positively about Elon Musk.