In 2005, eccentric hedge fund manager Michael Burry (Christian Bale) discovers that the U.S. housing market is extremely unstable, being based on subprime loans that are high risk and providing fewer and fewer returns. Predicting that the market will collapse sometime in the second quarter of 2007, he realizes that he can profit from this situation by creating a credit default swap market, allowing him to bet against the housing market. He visits several major banks and investment dealers with this idea; these firms, believing that the housing market is secure, accept his proposal. This earns the ire of Burry's clients who believe that he is wasting their money and demand that he stop his activities, but he refuses. As the predicted time of the collapse approaches, his investors lose their confidence and consider pulling their money out, but Burry puts a moratorium on withdrawals, much to his investors' anger. However, the market collapses just as he predicted and he produces 489% profits from the plan.
Trader Jared Vennett (Ryan Gosling) hears of Burry's actions from one of the bankers he dealt with, and soon realizes that Burry's predictions are likely true. He decides to put his own stake in the credit default swap market. A misplaced phone call alerts hedge fund manager Mark Baum (Steve Carell) to his plans, and Baum is convinced to join Vennett. The two discover that the impending market collapse is being further perpetuated by the sale of collateralized debt obligations (CDOs), groups of poor loans that are packaged together and incorrectly given AAA ratings due to theconflict of interest and dishonesty of the rating agencies.
When Baum attends the American Securitization Forum in Las Vegas, he interviews businessman Mr. Chau (Byron Mann), who has created synthetic CDOs, making what is described as a chain of increasingly large bets on the faulty loans. Baum realizes, much to his horror, that the scale of the fraud will cause a complete collapse of the economy. Baum's business partners convince him to go through with the credit default swaps, profiting from the situation at the banks' expense.
Eager young investors Charlie Geller (John Magaro) and Jamie Shipley (Finn Wittrock) accidentally discover a paper by Vennett and also decide to become involved in the credit default swaps. Since they are under the required capital for an ISDA needed to pull off the trades necessary to profit from the situation, they enlist the aid of retired banker Ben Rickert (Brad Pitt). The three visit the Mortgage Securities Forum in Las Vegas, where they manage to successfully make the deals. Shipley and Geller are initially ecstatic, but Rickert is disgusted by their essentially celebrating an impending economic collapse and soon-to-be-lost lives. The two are horrified, and take a much more emotional stake in the collapse by trying to tip off the press and their families about the upcoming disaster. Ultimately, they profit immensely, but are left with their faith in the system broken.
Burry semi-retires and invests only in water, Baum refuses to say "I told you so" to the world and continues his career, Rickert returns to his retirement, and Shipley and Geller unsuccessfully attempt to sue the ratings companies, with the latter electing to move to Charlotte, North Carolina to raise a family. Almost nobody involved in the creation of the CDO bubble is arrested, andBespoke CDOs are soon sold again. The film refers to "bespoke opportunity tranches," though in reality, they are usually referred to as a "Bespoke CDO" or "Single-tranche CDO."