Bridgewater putting on $1.5B option trade betting on market decline by March 2020.
https://www.wsj.com/articles/bridgewater-bets-big-on-market-drop-11574418601?redirect=amp#click=https://t.co/xyiKN6jA3v
https://www.wsj.com/articles/bridgewater-bets-big-on-market-drop-11574418601?redirect=amp#click=https://t.co/xyiKN6jA3v
There is a paywall on that article, so I am posting another link here:
Bridgewater bets more than 1 billion on global equity pullback by March
The key takeaway is the following:
Quote
Bridgewater paid roughly $1.5 billion for the options contracts, or just about 1% of the Westport, Conn., firm’s $150 billion in assets under management, according to people familiar with the matter.
This means they bought a lottery ticket, paying 1.5 Billion, to hedge their long exposure of 150 Billions with a short one of around 100 billion (this is something I read elsewhere behind other paywalls, so you have to trust me). This 100 billion short insurance will be effective at lower market level.
So, probably, it is only a way to avoid too heavy losses in case of a significant drop in the market.
It’s a good move. If the market crashes they win. If the market rallies they win.
If the market stays flat, they lose a small amount. But it seems unlikely to stay flat.
