Saturday, February 15, 2014

Soros Reloads SPY Puts, $1.3B Bet On S&P 500 Decline

Some may recall I broke the news last August (in advance of others who covered the story) that Soros had substantially increased a position in SPY puts (recorded in the Q2 2013, 13F filing), essentially a bet that the stock market will head lower:
What isn't yet making headlines (and probably won't on mainstream finance news sites) is that the largest position the fund now holds is SPY Puts, basically a term bet that the stock market is headed lower (although we don't know the exact structure of target dates and prices). The position (SPY Puts) relative to the total size of the fund increased from 1.28% to 4.79% over Q1 (more than tripled) and has increased to 13.54% over Q2 (almost tripled again).

Soros reportedly made $1 billion betting against the British Pound in 1992. We heard rumours of Soros making a $1 billion bet against the AUD (a position that has done well if true). We heard when he made $1 billion betting against the Yen. Where are the headlines for his $1.25 billion bet against the stock market? Bullion Baron
This position was substantially reduced in Q3 2013, falling from 13.54% of the fund to 5.14%.

However, the 13F filed today shows that Soros has reloaded his SPY put position. The Soros Fund Management LLC bought an additional 4,295,900 SPY put shares (153% change over the previous quarter), keeping it's spot as the largest position in the portfolio (as of 31st December, 2013) at 11.12%. While as a percentage of the portfolio it is slightly lower than in Q2, the value of the consideration is some $60 million higher at $1.3 billion.

Of course the position may just be a hedge & being six weeks into the next reporting period it's possible that the position has been reduced (or increased!).

Here is a summary of the 13F changes for Soros' SPY puts position over the last few years:

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SPY closed Friday at 184.02, just a fraction lower than the price on December 31st (184.69), however traded 6% lower in early February.

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The second and third largest positions reported in the 13F are a new put position on the Energy Select Sector SPDR Fund (XLE). The market value of this position is almost $400 million and accounts for 3.38% of the portfolio. And a 158% increase in TEVA (Teva Pharmaceutical Industries Ltd., the world's biggest maker of generic medicines), which has seen a substantial rise in price since the reporting period finished.

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