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businessinsider - 16 days ago

Ray Dalio s hedge fund has bet more than $1 billion that global stocks will tumble by March, WSJ says

Ray Dalio s hedge fund has placed a bet north of $1 billion that global stocks will fall by March, according to a report from the Wall Street Journal. The position is made up of put options that could pay out to Bridgewater Associates if the S P 500 Index, Euro Stoxx 50, or both drop in value, the WSJ found. Put options are contracts that grant investors the right to sell stocks at a predetermined price by a specific date. Visit the Business Insider homepage for more stories. Ray Dalio s hedge fund has placed a wager of more than $1 billion that stocks around the world will decline by March, according to a Wall Street Journal report citing people familiar with the matter. Bridgewater Associates has built up a position of put options with the help of banks such as Goldman Sachs and Morgan Stanley that could generate returns if the S P 500, Euro Stoxx 50 or both fall during the period, the WSJ found. Put options are contracts that grant investors the right to sell stocks at a predetermined price by a specific date. According to the report, Bridgewater s put options will expire in March 2020 and the firm shelled out about $1.5 billion for the contracts, which are linked to about $100 billion worth of the two stock indexes. Its unclear why Bridgewater built up the position, the WSJ reported, citing multiple clients that said it could be the firm hedging against its exposure to the equity market. The magnitude of the bet has raised the price of some options, the WSJ found. The amount of S P 500 put options outstanding has also increased to a four-year high, according to data from Trade Alert cited by the WSJ. Read more: A fund manager who s outshining 95% of his peers unpacks the secret weapons behind his top 2 tech stocks and explains why he almost never invests in hot IPOs The news also comes as markets have charged to all-time highs in recent weeks amid ongoing negotiations in the US-China trade war and lingering worries of a global slowdown. Further, Wall Street titans such as Leon Cooperman and Paul Tudor Jones have issued warnings over the last few months that an Elizabeth Warren presidency could tank stocks. Bridgewater told the WSJ that its investments change frequently and are often used as hedges for other trades, and that it would be a mistake to read to much into one position. The firm added that it doesn t have positions that are meant to hedge or bet on political developments in the US. March 2020 is an important time for the Democratic primary because most of the party s delegates will be awarded by the end of the month, the WSJ pointed out. Dalio, a billionaire investment guru, has expressed concern about the global economy several times over the last few months. In October, he said the world economy is in a great sag and that central banks might not be able to combat it due to historically low interest rates. The veteran investor also wrote in a LinkedIn post in early November that the world has gone mad, and the current state of financial markets is unsustainable. Join the conversation about this story NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the 3rd wave firms that are leading the next round of tech disruption


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