Two days after Pershing Square began building its yuan position, China did a 2% surprise devaluation that substantially increased the cost of the options it had intended to keep buying.

The claim covers the timing of the devaluation, its size and its effect on option costs. The devaluation is dated 11 August 2015, when the PBoC cut the yuan's fix by about 1.9%. True: Pershing Square's own records (letters or reports) show it began buying yuan positions or options about two days before 11 August 2015, and option costs (implied volatility or premiums) rose substantially after it. Mostly true: the devaluation and the rise in option costs are confirmed, but the start of the position was a few days off from 'two days', or the size was about 1.9% rather than exactly 2%. Mixed: the timing is materially different but the other parts hold. Mostly false: there is no evidence the position began near that date, or option costs did not rise much. False: there was no such devaluation, or the position was started at a clearly unrelated time.

Set before the research began.

1. E1 China devalues yuan currency to three-year low BBC · 11 August 2015

   “The lender said the move was a "one-off depreciation" of 1.9% in a move to make the exchange rate more market-oriented.”

2. E2 China said to slap new requirement on yuan trades to stem swings Business Times (Singapore), citing Bloomberg · 1 September 2015

   “The onshore currency's one-month implied volatility, which measures expected swings and is used by some traders to price options, jumped 427 basis points to 5.78 per cent in August, the biggest monthly advance since 2005.”

3. E3 China takes on hedge fund bosses Ackman, Bass, Tepper in yuan ... CNBC · 1 February 2016

   “Bill Ackman's Pershing Square said in a January 26 investor letter that the fund's had bought currency put options (contracts that give the investor the right, but not the obligation, to sell an asset a predetermined price in the future) in the hope of offsetting potential losses on its broader Chinese investments.”

4. E4 Pershing Square Holdings 2015 Annual Letter (January 26, 2016) Pershing Square Holdings, Ltd. (Bill Ackman letter to shareholders) · 26 January 2016 Own record

   “Last summer, we built large notional short positions in the Chinese yuan through the purchase of puts and put spreads in order to protect the portfolio in the event of unanticipated weakness in the Chinese economy.”

5. E5 Bill Ackman Finds Shorting Yuan, Riyal More Vexing Than Valuable Bloomberg (syndicated on Yahoo Finance Singapore) · 27 January 2016

   “Pershing started building up puts -- options that allow the purchaser to sell the currency at a set price in the future -- and put spreads on the yuan in August, two days before China's surprise devaluation of the currency.”

6. E6 Led by ringgit, Asian currencies set for biggest monthly decline in three years The Straits Times (Bloomberg) · 31 August 2015

   “the yuan declined 2.7 per cent as its one-month implied volatility quadrupled amid a shift to a more market-determined exchange rate.”

7. E7 Chinese Exchange Rate Policy: Lessons for Global Investors CESifo Working Paper No. 8493 (Melvin and Westermann), hosted on EconStor · 2020

   “on the day before the policy change announced on August 15, 2015, 1-month implied volatility was 1.1625 for CNY and 1.5200 for CNH. On August 15, implied volatility jumped to 6.3400 for CNY and 7.6775 for CNH.”

Bloomberg (E7) reports that Pershing Square began buying yuan puts and put spreads in August, two days before China's surprise devaluation. Pershing Square's own letter (E6) confirms it built the position "last summer" but gives no exact date. The BBC (E2) gives the devaluation as 1.9%, not exactly 2%. E3 and E8 show the yuan's one-month implied volatility, which is used to price options, roughly quadrupled in August, so option costs did rise substantially. Because the size was about 1.9% rather than exactly 2%, the criteria make this mostly true.