Speculators increased bearish bets on the Swiss bank last year on concern about how much capital it would need to bolster its balance sheet in a confidence crisis deepened by unsubstantiated social media reports on the bank's financial health.
Hedge funds and other speculators borrowed just over a fifth of Credit Suisse's stock in order to short it as of Oct. 31, the highest level since at least 2006, according to S&P Global Market Intelligence. Weinstein told Reuters that he holds a dual long and short position on Credit Suisse's credit default swaps , derivative contracts that offer insurance protection and pay out when a company defaults on its debt. He is long 2-year and short 10-year protection on the bank.
"The curve trade in Credit Suisse reflects my view that one way or the other, in the next two years the drama around Credit Suisse will resolve for better or for worse. I believe it will be for better and that they recover," said Weinstein, offering a glimpse of his trading strategy. Weinstein led a proprietary trading fund at Deutsche Bank which was spun out to start Saba Capital Management in 2009. Famously, the fund bet against JP Morgan's "London Whale" trading position in CDS indices in 2012.Demand for a company's CDS can also attract investors seeking protection against the firm or betting on its demise. Credit Suisse's CDS
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