Fears of a stock market crash are swirling following the release of a 13F filing that shows Scion Asset Management, brainchild of Big Short star Michael Burry, shorted both the S&P 500 and Nasdaq Composite during Q2 of this year, along with selling nearly its entire holding of bank stocks. Indeed, the hedge fund has apparently taken a notably pessimistic view of U.S. financial markets as of recently.
Per the regulatory filing, released Monday, Scion purchases 2 million SPDR S&P 500 (NYSEARCA:SPY) puts and 2 million Invesco QQQ Trust (NASDAQ:QQQ) puts between March and June of this year.
If you recall, puts are a type of derivative contract that allows the holder to sell an asset at a specified strike price. Puts are in the money below the strike price, so, if the underlying security’s value diminishes relative to the strike price at or before the expiration date, the holder profits. Therefore, Burry is betting that the S&P 500 and the Nasdaq Composite will decline.
Additionally, Scion sold off its stakes in a number of major financial institutions, including Wells Fargo (NYSE:WFC), First Republic Bank (OTCMKTS:FRCB) and Capital One Financial (NYSE:COF). Scion also exited the likes of Alibaba (NYSE:BABA) and Devon Energy (NYSE:DVN).
As such, Scion’s actions reflect a fear of imminent decline in banking stocks, at the very least.
Does Scion Anticipate a Stock Market Crash?
Interestingly, Scion did make some purchases in the second quarter of the year. The hedge fund purchased 25,000 shares of Charter Communications (NASDAQ:CHTR), 200,000 shares of Comstock Resources (NYSE:CRK), 100,000 shares of CVS Health (NYSE:CVS), 125,000 shares of Vital Energy (NYSE:VTLE), and about 128,000 shares of Safe Bulk (NYSE:SB).
Scion’s trades certainly reflect a very Burry-esque skepticism in this year’s bull rally. Burry shot to fame after earning his firm nearly $1 billion by betting against housing prior to the Great Recession in 2008. Now, retail investors turn to him for his often contrarian view points.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
