Soros bets against stockmarket

Posted by in Economics

Billionaire investor George Soros, who rose to fame and fortune by betting against sterling in 1992, yesterday showed his latest hand: nearly doubling his bet against the S&P500 index. The Hungarian refugee has been shifting the fund’s focus back to the big-picture economic global view that earned him recognition as he continues to warn of a coming financial crisis, much as he did leading to the 2007 crash.


The 86-year-old’s fund, Soros Fund Management, disclosed in a regulatory filing it had increased its bet against the S&P 500, the main index used to measure big stock performance in the US, and holds put options on roughly four million shares in an exchange-traded fund that tracks the index. That is up from “puts” on 2.1 million shares as of March 31.

Put options give the buyer the right to sell stock at a set price within a specified time. They generally rise in value as the price of the underlying stock falls relative to the strike price. Call options, meanwhile, grant the buyer the right to buy the stock at a target price within a specified time. Mr Soros hasn’t specified when those positions were placed or at what strike price and their expiration date.

The holdings were disclosed in a 13F filing with the Securities and Exchange Commission, a quarterly requirement for investors managing more than $US100 million ($130m). The report indicates the number of shares held and the value of each stake at the end of the quarter.

He may be right about a looming financial crisis, but every bet like this is another large chunk of capital which isn’t being invested in the productive economy, and if he wins, his profit will be someone else’s loss.