Yeah what usually happens is they match it with call purchases and thus they are not actually your counterparty economically.

There is enough bullish momentum that a trade of this size can actually be placed (of course in chunks).

Only applies to European Options

This seems to back that up: https://www.sec.gov/files/form13f.pdf

FWIG you can't actually see what premium was paid on an option unless the buyer chooses to disclose that themselves.

It is commonly referred to as a ‘short position’, though it is not ‘shorting the stock’. Equally, purchasing calls* is referred to as a ‘long position’ (as is holding the equity).

edit: smallmancontrov below pointed out that I wrote 'purchasing puts' was long, when I meant to write 'purchasing calls'

It can be both! :D

Yup, and the further out the expiry date for puts, the higher the price you pay.

I looked into it and it's not that cheap - and feels like the market is already pricing in risk of a large correction.

But you can still make a lot of money if you time it right.

Yeah, my (limited) understanding is that the GP's argument would be valid for an options trader who looks for pricing inefficiencies to take advantage of (regardless of bullish/bearish outlook) but not _that_ important for someone betting on a black swan event?

> won’t be commensurate with the risk he took on

Former options market maker here. We have insufficient data to conclude that.

I also happen to have experience unwinding correlation books after their originators shat the bed. Predicting a crisis is hard. Predicting correlations in a crisis for esoteric assets is almost impossible.

Burry wanted to bet on specific overvalued stocks. Not a general market crash. For that, puts are probably the best tool if the expectation is a sharp correction followed by, in all likelihood, a Trump put.

> But it won’t be commensurate with the risk he took on.

On what basis do you say this?

Yea; true. My thought when evaluating these was "I am confident the price will drop significantly within the next 6-18 months. But if I screw up the timing, or it drops to 1/3 the value instead of 1/2 etc, I lose money or break even. While I'm reasonably confident the normal short will pay off, since I don't have to nail the amount or timing.

> With shorting, you can in theory have infinite loses

This risk can be hedged with futures and options.

That pre-tariff stockpiles have been depleted is going to make some hidden pain more visible.

6 months ago you could accurately say there's "no precedent for them to continue rising". You may be saying the same thing 6 months from now.

Palantir has a market cap of $400B+ and Nvidia is $5T. This short translates to 0.225% and 0.00374%. This mostly translates to a thesis that the stocks would “probably” go down a bit than a bet that predicts recession.

It seems like the economy is on a “K” shaped flywheel. How much worse can the economy get for the regular worker before the systems just pops? We’ve put so much speculation into an AI/tech salvation that seems premature, especially when you look at ROI vs depreciation timelines.

I’m not sure what timeline to place on that but there has to be a floor for how bad it can get for the regular man.

Shit is just expensive. Young people can’t buy houses, good jobs are drying up, and inflation isn’t stopping.

Economist have predicted 179 of the past 7 recessions.

> Reminder that economist have predicted 9 of the past 7 recessions.

Is there someone with a better record then?

>> Reminder that economist have predicted 9 of the past 7 recessions

Historically I think the reality has been the opposite of that, economists have been extremely reluctant to make predictions of an oncoming recession. This was certainly true during the great recession when economists were denying that a recession was coming even after one had actually started. That is to say, economists could not even predict the present.

There are a few economists who are predictably gloomy ("permabears", I suppose Nouriel Roubini would qualify) and I guess now there is political pressure to predict a recession anytime the other political party is in power, but from my perspective, if mainstream economists are predicting a recession, that likely means the recession is almost over.

Is it a conspiracy if they do it?

Uhh... Powell's term as chairman ends in May 2026. His term as a board member ends Jan 2028. Senate confirmation is irrelevant because Trump will not nominate him again for anything.

Do you have any specific criticisms?

> never understand what it is about Israel that makes people lose their minds

Availability heuristic [1].

Flat earthers and folks deep in their small-country national politics do the same thing, overestimating the causal weight of the thing they’re obsessing about to any effect.

The useful takeaway is to recognize when you do it in smaller doses. What’s the first explanation you tend to have a hunch for explaining phenomena which are too diverse to be reasonably explained by a single factor.

[1] https://en.wikipedia.org/wiki/Availability_heuristic

Not minds; lives.

Is there anything more concrete than that? Large wins on their own aren't meaningful if they aren't good risk adjusted trades or repeatable. I've made big wins but I don't consider myself a good trader.

He's been bearish for the last n years. His Twitter handle is Cassandra because he tries to warn people about impending doom, but nobody listens. He gave up at one point because he tweeted SELL and then everything was fine.

tl;dr he's a perma bear.

I actually don't think he's wrong, but one thing I've learned is that it's not enough to recognize a bubble. Almost everyone sees the markets are, as they say, frothy. But you need to see if there's a needle nearby. Without that you're just trying to get lucky.

Puts especially are really hard because they expire. They limit your loss compared to shorts, but you need to time it perfectly.

we shouldn't push back on people wanting to learn but we should really point out very loudly that not fully understanding something like shorting can turn a small investment someone was fully ok with losing into a life altering bankruptcy due to a margin call.

Leverage can be a fearful thing.

> "If you have to ask, ask and learn..."

Totally! But also keep in mind this :)

https://www.explainxkcd.com/wiki/index.php/1570:_Engineer_Sy...

thank you for being nice

I would simply correctly price the equities in the first place.

How is selling call options not betting against a company?

Technically writing calls is also taking the downside.

If you buy a PUT, you pay the premium. You'll lose that if your option expires out of the money.

If you sell a PUT, your exposure is much greater; you're the one who has to pay up if the option ends up in the money.

The deadline is the date of the option.

If you do lose money, it's a capital loss (tax benefit) and vice versa for capital gains.

You buy an option that has a particular cost, which gives you the right to sell stock at a specific price in the future (the "strike price"), within a certain time frame. Typically, these are denominated so that you contract to buy or sell 100 shares. In a "naked" put, you don't actually have the stock that you propose to sell. In the future, you plan to "exercise" the option by buying the stock at the market price. and then immediately sell it at the contracted price.

A put option represents a belief that the price will fall, which makes "right to sell the stock" valuable. Similarly, a call option represents a belief that the price will rise. Both can be bought and sold; you do not "make" them but rather trade in them, just as you would in stock. But the relationship between the stock price and the result from an option is not linear; selling a put and buying a call are both nominally "long" the stock, but are not equivalent.[0]

When you buy an option, you are always immediately out for the cost of the option itself (the "premium"). This is separate from the strike price. It's the market's assessment of how much your "right to sell later" is worth, in itself. By doing this, you are speculating that you can recover that money later, based on how the stock performs. (Depending on your strategy, this can involve buying or short-selling the "underlying" stock, as well as other options.)

So if you buy a put, you pay money (the premium) up front, and you potentially just lose that money completely. Sane options strategies take your entire portfolio into account, and use options to hedge the risk profile of the rest of the profile (rather than trying to use the rest of the profile to justify taking on risk using options).

----

Some details, and further exploration.

Options represent essentially zero-sum speculation on top of the actual price movement. For example, holding everything else constant, a call option increases in value as the price of the underlying increases (the right to buy stock at a fixed price becomes worth more, when the stock is worth more). When a company does well, everyone who holds the actual stock shares in the company's good fortune; but the profit of call holders comes at the expense of those who sold (or "wrote") those calls.

The option is priced according to market expectations of risk (how likely is it that the stock's price will fall below the chosen mark?), and according to duration (the longer you reserve the right to exercise the option, the more likely it is that you'll get a profitable opportunity; therefore, the more valuable and thus expensive the option is). For long-term options (especially now that interest rates are non-trivial) there's a second meaningful duration factor: buying an option comes with the opportunity cost of not holding cash (or treasury bonds) for that period, and that also has to be priced in.

"American" options give you the right to exercise at any point before the deadline; "European" options only allow you to exercise at the deadline. This is also priced in; having more flexibility is worth more.

If you have chosen well, the market price for the stock goes down by a lot. This allows you to profit when you exercise the option.

If you have chosen poorly, you never get the opportunity to profit. Your options "expire worthless"; an option to sell at a point that has already passed has no value. You have been left holding the bag.

In between, you might exercise in a way that recovers only part of the premium you paid.

Much riskier is to sell options against securities you don't hold. (You will likely be legally barred from attempting this at all, and even wealthy experienced traders will be required to hold some percentage of the security value that their options represent.) You are hoping that the option expires worthless, so that you simply claim its value uninhibited. If it doesn't, you may be "assigned" i.e. legally on the hook for someone else's exercise of the option. If you sold a put, you may be forced to pay an inflated price for a stock that crashed. If you sold a call, you may be forced to acquire stock in order to sell it at a discount in order to fulfill your option. The potential loss for selling a put typically far exceeds the maximum potential profit; the potential loss for selling a naked call is unlimited (as we suppose the stock's value can go to infinity).

But if your sale of a call is "covered", or your sale of a put is "cash secured", this means you fully own the security (underlying stock, or liquid assets respectively) corresponding to the option. The cash secured put still incurs the risk of wiping out your entire cash supply, much as if you'd simply bought 100 shares directly, and it puts a hard limit on your upside. But it lets you profit from the stock without actually holding it.

Given sensibly chosen strike prices, covered calls actually end up with a similar risk/benefit profile. As the stock goes to zero, all you end up with is the option premium, because you were holding the stock. If the stock does well, your net profit is limited to the option premium, because the profit from holding the stock cancels out the liability of the option. (Equivalently: you are required to sell the stock at the strike price, but you already have that stock; no matter how high the underlying stock value gets, you can only claim the strike price.)

[0]: Doing both gives risk exposure roughly equivalent to holding the stock, without actually buying it. This is called a "synthetic long". As you can imagine, that is effectively unlimited leverage in itself, and if you attempt it you will be required to hold a significant amount of cash to limit your leverage, and jump through a lot of regulatory hoops to prove both your competence and solvency. I didn't mention this at the start, because you need the details to understand it.

Do you think they're overpriced? Or do you just not trust retail investors to understand the effective leverage, spread of outcomes etc.?

I'm told that covered-call ETFs generally underperform (in addition to being inefficient) and "generating income" is best accomplished by just selling shares as needed.

In the end the value is just discounted dividends or there's an arbitrage opportunity under the risk neutral measure.

This isn't a matter of rules of thumb. This is what's required to have prices that do not create an arbitrage opportunity.