Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

Yes, it's true that at the end of the second quarter George Soros was sitting on a huge equity-options position that would profit if the market goes down. It's an intriguing position, though let's not get too carried away describing it.

For one thing, it wasn't the portfolio's "biggest holding" in the second quarter, just as it wasn't its "biggest holding" in 2013, despite what news reports said. 

The reason for the confusion is the way equity derivatives are reported in 13F filings required by the Securities and Exchange Commission. At the end of the quarter, Soros Fund Management owned puts to sell about 4 million shares of the biggest exchange-traded fund tracking the S&P 500. Those shares were worth $839 million as of June 30, so that's the number that went in the 13F column listing the dollar value of each position. As of Monday's close, those 4 million shares were worth about $877 million.

However, it should go without saying, Soros paid nowhere near $839 million for those puts and they will never, ever be worth $839 million to him. The only way they would be worth anywhere near that is if the S&P 500 literally went to zero. As of Monday, the highest-priced put on the "SPY" among actively traded options tracked by Bloomberg was $17.05 a share for contracts conveying the right to sell the ETF for $235 by Nov. 18. The lowest-priced puts cost a penny a share. 

Put Off
Despite the rally in stocks, George Soros remains bearish
Source: Bloomberg

So, theoretically, Soros's puts are likely worth somewhere north of $40,000 and less than $68 million. And whatever he paid for the 1.9 million shares worth of puts he added in the quarter, they're most likely worth less now because the market has rallied since then. His biggest long positions, by contrast, are a $533.5 million stake in Liberty Broadband, a $130.7 million position in Adecoagro SA and $89 million worth of Polycom Inc. 

Still, his puts on the SPY are not an insignificant position and could increase hugely in value should the market hit some turbulence, especially because protection against volatility has become cheap. The VIX is lingering near its lowest levels of the bull market after the price of puts plunged following the rebound from Brexit, and the ratio of puts to calls on the SPY is low.

Hedge, Schmedge
While George Soros loaded up on puts last quarter, the ratio of puts to calls on the SPY has been trending downward. That's a sign that there's more demand to buy this rally than sell it.
Source: Bloomberg

And it's not the only way he's positioned to be rewarded if risk-off sentiment returns. He also holds puts on 1.8 million shares of an ETF tracking the Russell 2000 Index of small caps and puts on 820,000 shares of an ETF tracking junk bonds. 

It all jibes with the reports of the "big, bearish bets" he's been overseeing this year. It's notable that he's making these hedges in a manner that's plain for all to see in 13F filings. That makes one wonder what other outright bearish bets lurk elsewhere in the corners of the portfolio that don't need to be reported.

Soros appears to be convinced he needs to either be protected against a 2008-style crisis or is actively betting on one. His public comments make it sound as if it may be the latter, even as the catalyst for the crisis is a moving target. In April, it was China that was going to set the clock back to 2008. In June, it was Brexit.

He's been right before, so his views will always make headlines. And frothy valuations may leave U.S. equities especially vulnerable to a whiff of crisis, even if it's a short-lived crisis like Brexit. But Soros may need to start shopping for a new crisis soon. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Michael P. Regan in New York at

To contact the editor responsible for this story:
Daniel Niemi at