The Greatest Trade Ever
Bill Ackman was terrified about what would happen to the markets in February 2020 so he placed a bet against $64.7 B of investment grade bonds. This bet was through credit default swaps (CDS). CDS essentially allow a buyer to buy insurance in case a bond defaults. However, sometimes traders buy this insurance without owning the underlying bond.
This is what Michael Burry did in his famous 2007 “big short” manoeuvre. Ackman pulled off a similar big short, which we call Big Short #2. Despite the funny sounding name, this trade took only about 1 month to pay-off $2.6 B. Burry’s trade took several years so it could have cost his fund a lot of money if the bet didn’t eventually go his way. So which trade do you think was better?
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The Music in the video is the following:
1) Which Way Is Up? 1:59 Silent Partner Dance & Electronic | Dramatic
2) Follow The Shadows 0:02 / 2:46 The 126ers Pop | Sad
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