Author Topic: Do you have the balls?  (Read 18563 times)

samwise

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Re: Do you have the balls?
« Reply #90 on: March 23, 2020, 08:46:21 PM »
Eric would you recommend this strategy for other stocks or etfs like SPY? Why just WFC.


undervalued

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Re: Do you have the balls?
« Reply #91 on: March 25, 2020, 11:58:28 AM »
https://www.barrons.com/articles/how-bill-ackman-turned-27-million-into-2-6-billion-during-the-coronavirus-crisis-51585147940

Umm, is this strategy available to the average investor? How do you replicate this for the average guy? 100x returns is insane, and he did it in like a month.
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ERICOPOLY

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Re: Do you have the balls?
« Reply #92 on: March 25, 2020, 12:04:18 PM »
Eric would you recommend this strategy for other stocks or etfs like SPY? Why just WFC.

Well, I'm not recommending it to anyone.  I have WFC because I just do.

LC

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Re: Do you have the balls?
« Reply #93 on: March 25, 2020, 12:53:59 PM »
https://www.barrons.com/articles/how-bill-ackman-turned-27-million-into-2-6-billion-during-the-coronavirus-crisis-51585147940

Umm, is this strategy available to the average investor? How do you replicate this for the average guy? 100x returns is insane, and he did it in like a month.

The guy probably bought CDS on airlines hotels travelcos cruiselines etc.
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thepupil

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Re: Do you have the balls?
« Reply #94 on: March 25, 2020, 12:59:04 PM »
I would guess he bought OTM payer swaptions on CDX HY and CDX IG series.

On March 23rd, we completed the exit of our hedges generating proceeds of $2.6 billion for the Pershing Square funds ($2.1 billion for PSH), compared with premiums paid and commissions totaling $27 million, which offset the mark-to-market losses in our equity portfolio. Our hedges were in the form of purchases of credit protection on various global investment grade and high yield credit indices. Because we were able to purchase these instruments at near-all-time tight levels of credit spreads, the risk of loss from this investment was minimal at the time of purchase.

Jurgis

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Re: Do you have the balls?
« Reply #95 on: March 25, 2020, 02:15:56 PM »
https://www.barrons.com/articles/how-bill-ackman-turned-27-million-into-2-6-billion-during-the-coronavirus-crisis-51585147940

Umm, is this strategy available to the average investor? How do you replicate this for the average guy? 100x returns is insane, and he did it in like a month.

I'm not gonna look it up, but I'm pretty sure you could have done 100x by buying simple OOM puts before the market tanked.
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spartansaver

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Re: Do you have the balls?
« Reply #96 on: March 25, 2020, 02:31:42 PM »
https://www.barrons.com/articles/how-bill-ackman-turned-27-million-into-2-6-billion-during-the-coronavirus-crisis-51585147940

Umm, is this strategy available to the average investor? How do you replicate this for the average guy? 100x returns is insane, and he did it in like a month.

I'm not gonna look it up, but I'm pretty sure you could have done 100x by buying simple OOM puts before the market tanked.

Mine didn't go up 100x.

Purchased Aug. SPY 300 strike at the end of January and the max they were up was around 11x. I think if I'd gone much further out of the money you could have hit the 100x. I'm not even sure its possible to get 100x anymore on S&P puts due to the massive premium for volatility.

Jurgis

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Re: Do you have the balls?
« Reply #97 on: March 25, 2020, 02:36:19 PM »
https://www.barrons.com/articles/how-bill-ackman-turned-27-million-into-2-6-billion-during-the-coronavirus-crisis-51585147940

Umm, is this strategy available to the average investor? How do you replicate this for the average guy? 100x returns is insane, and he did it in like a month.

I'm not gonna look it up, but I'm pretty sure you could have done 100x by buying simple OOM puts before the market tanked.

Mine didn't go up 100x.

Purchased Aug. SPY 300 strike at the end of January and the max they were up was around 11x. I think if I'd gone much further out of the money you could have hit the 100x. I'm not even sure its possible to get 100x anymore on S&P puts due to the massive premium for volatility.

Fair enough.
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"Before you can be rich, you must be poor." - Nef Anyo
"Money is an illusion" - Not Karl Marx
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TwoCitiesCapital

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Re: Do you have the balls?
« Reply #98 on: March 25, 2020, 02:39:24 PM »
https://www.barrons.com/articles/how-bill-ackman-turned-27-million-into-2-6-billion-during-the-coronavirus-crisis-51585147940

Umm, is this strategy available to the average investor? How do you replicate this for the average guy? 100x returns is insane, and he did it in like a month.

I'm not gonna look it up, but I'm pretty sure you could have done 100x by buying simple OOM puts before the market tanked.

Mine didn't go up 100x.

Purchased Aug. SPY 300 strike at the end of January and the max they were up was around 11x. I think if I'd gone much further out of the money you could have hit the 100x. I'm not even sure its possible to get 100x anymore on S&P puts due to the massive premium for volatility.

You might've gotten close if you'd done SPY 200s in January -- but I'm just speculating w/o actually looking to see what the premiums were verse what they peaked at.

I'd also add - the main benefit to Ackman's trade, and the reason he was able to achieve 100x, was because he timed it right. These trades are negative carry requiring cash settlement every month/quarter. If it had taken another 2-3 months to hit the U.S. than Ackman expected, he would have likely put up another $20 million and his 10x return becomes 5x and so on and so forth.
« Last Edit: March 25, 2020, 02:41:03 PM by TwoCitiesCapital »

thepupil

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Re: Do you have the balls?
« Reply #99 on: March 25, 2020, 02:58:00 PM »
the hedging instrument was not equity index puts. The Pershing Square letter says they purchased hedges on credit and investment grade indices.

CDX IG went from 40 bps to 150 bps, straight to summer 2011 levels. I imagine one could have bought an option to get short at 100 bps for nothing.

The way you make a ton of money on a hedge is when something with extremely low spread volatility suddenly has it (like subprime) Equity vol was low but has a frequent bid from institutions like annuity sellers and insurance cos.

There are also bespoke tranches of these indices where he could have done something like betting the IG basket would have 10 defaults on 125 names (this outcome would be priced to an extremely low probability).

Ackman likely blew up some European structured credit fund or trading desk.