In one sentence: Reading Burry's 13F filing, Phil and Danielle find that a big "Tesla position" is actually put options, and use it to show how to read a 13F correctly (options inflate the numbers, cash is missing, percentages are your job) and why options are gambling with a brain, not Rule #1 investing.
Key ideas
- Look at the source. Danielle first saw Tesla listed on WhaleWisdom and assumed Burry owned the stock. On SEC EDGAR (fund name: Scion Asset Management) the filing marks "put" and "call" next to the name, so it was a bought put. Go to the filing itself, not a third party. [02:00–05:00]
- Option values are misleading. A 13F reports the value of the underlying shares, not the option's price, and the SEC list doesn't make clear whether the fund bought or sold. So totals can be hugely overstated: one site showed about $1.4 billion for a fund reporting about $640 million in discretionary assets. [05:00–06:00, 14:00–17:00]
- Cash is missing, so percentages mislead. Filings leave out cash and don't give percentages. Phil's site showed about $135 million in stock holdings against about $639 million of reported assets, so the holdings may be only a fraction of the fund. An 8% weight of $135 million is a very different size from 8% of $639 million. Always compute weights against total capital. [09:00–14:00]
- Position size has to be read against the manager's size. A few million is a rounding error at Berkshire but meaningful at a small fund. Phil thinks Buffett's lieutenants (Ted and Todd) make the smaller buys, which is an assumption. [13:00–15:00]
- Who Burry is. Brilliant contrarian who shorted mortgage bonds before the crisis ("The Big Short"), clashed with his own investors, shut his fund, and reopened. [06:00–10:00]
- How a put works. A put gives the right to sell at a set price. If Tesla is at $644 and he buys a $600 put, he gains if it falls well below $600 before expiry. Most holders sell the option rather than exercise. It's insurance on a house you don't own. [17:00–24:00]
- How a call works. Buying a call is a leveraged bet the stock will rise (the Google example uses a $3,000 strike). The CVS calls appear to be a way to add exposure without spending the cash for shares. Selling calls (Citi, Pfizer) is a bet the price won't rise and can lose a lot if it does. [24:00–33:00]
- Phil's own use. Phil says they use deep in-the-money calls bought for a couple of years for about 2-to-1 leverage with limited downside. He doesn't go through the numbers. This is his description. [28:00–30:00]
- It's gambling with a brain. Phil says these are speculative, leveraged bets on direction and timing, like counting cards, not investments in businesses. Options are risky and "we don't talk about them" much. Learn them and paper trade first. [33:00–35:00]
- 13Fs are for ideas. Use them to see what others are doing, but know the filing's limits. Coattailing works only if you still do the Four Ms and wait for a price. [24:00–25:00]
How it maps to RuleOne
- Cloning belongs to the R step: a 13F buy is a lead, then the Understand work starts (001).
- If the agent stack ever ingests 13F data, it should drop option lines or flag them, and compute percentages against total reported assets, not just equities.
- Phil mentions that Rule #1's own Guru stocks page leaves out puts and calls and doesn't show cash. That's a limit in his tool, not a feature of ours.
Buffett, Munger and Graham links
- Buffett's view of derivatives as "financial weapons of mass destruction" is in his 2002 Berkshire letter. Berkshire has sold long-dated puts, so the contrast is the buyer or seller side. Check the letter before citing.
- Graham drew the line between investment and speculation in The Intelligent Investor, ch. 1.
Words to know
- 13F: quarterly holdings report from managers with over $100 million, filed within 45 days of quarter end.
- Put option: right to sell at a set price before a date.
- Call option: right to buy at a set price before a date.
- Strike price: the agreed price in an option.
- Underlying: the stock the option refers to.
Try this
Open EDGAR, search "Scion Asset Management" or a manager you admire, and read the latest 13F-HR. Mark every row labelled put or call and recompute the top-five weights without them. Then look for the same names at /stocks/.
Check yourself
- Why can a 13F make a fund look like it owns more than it does?
Answer
Options are listed at the value of the underlying shares, and cash isn't shown, so totals and percentages mislead. - What does buying a put on Tesla say?
Answer
It's a bet the price will fall before expiry; the buyer's loss is limited to the premium paid. - Why does Phil call options "gambling with a brain"?
Answer
They are leveraged bets on direction and timing rather than ownership of a business bought with a margin of safety.
Short quotes
"These aren't investments per se. These are gambles." (Phil, ~33:00, auto-transcribed)