Sharpe Two

Who needs free cash flow when AI will have destroyed humanity by then?

Instead of: refreshing your P&L every five minutes → closing the app doubling down → halving your size buying calls on the stock everyone's talking about → asking who's happy to sell them to you a gut feeling → a position size

Whatever your views on BTC, vol isn't cheap in there, especially with CPI behind us. Some decent odds to see IV in $IBIT exceed subsequent RV in the 30 days horizon. If you are long here, you will need a serious trend or a very strong catalyst !

Big vol crush: $SPX +2.3%, $VIX -5 pts. With vol of vol this high, that’s normal. The interesting part is the short end: 1-2 week options now trade about where realized vol is. Further out, implied is still 8 pts over realized. Short-dated hedges aren’t expensive anymore.

On Oct 6, $NVDA's IV read 28. Options were priced for a calm month. Last Thursday: 62.5, the highest since the Apr 25 tariff crash. And that was before this weekend’s news. $NVDA is still ~7% of the S&P 500. Looking at the VIX, you wonder how much of it is NVDA's premium?

Thursday was a risk-asset panic. One-month implied vol, Wed to Thu: S&P 500: 16 to 25 Small caps: 19 to 29 Emerging mkts: 25 to 32 Bitcoin: 37 to 45 Oil: 56 to 57 Long bonds: 11 to 12 Gold: 23 to 24 High yield: 4.3 to 5.7 Stocks and crypto repriced. The rest barely blinked.

Will the S&P close up today? Yes or No. Guessing is hard in low vol, even harder when swings are 3x normal. You see a 1% bounce, get in, watch it reverse, get out and lose your shirt. The job today: not getting fooled by variance. Let the stress pass before you get back in.

Did the US lose jobs in October? Yes or No. Polymarket says 12%. Forecasters expect about 60,000 new jobs. We find out in 5 minutes.

Who remembers December 18, 2024? The VIX went from 16 to 28 in one afternoon. Two days later it was back at 18. Today it's at 27. Maybe it's December 2024 again, maybe it isn't. That's why we buy protection before days like this, not during them.

We regret to inform you that trading small, only selling options when they cost more than the underlying usually moves, writing down why you took every trade, and sitting on your hands most days will do more for your account than any indicator you buy this year.

USO's out-of-the-money calls are priced at a higher volatility than its puts. Equity traders forget this: in stocks, usually only the puts are expensive. In oil, both wings are. So a 15-delta strangle gets paid on both sides, if implied beats realized. Today we put that at 67%.

Will the S&P 500 close up 2% today? Yes or No. Polymarket says 11% (SPY above $770). It’s happened twice all year. We’ll know at 4 pm if today is the third.

The GOP got smoked. Shocker! You know what else is getting smoked premarket? VIX, already down 2 points, with the term structure flattening. Small caps and $IWM are still paying though, and you still have strong odds to see implied exceed realized over the next few weeks.

Financial media 9pm: Stocks lose 1% as Democratic landslide is bad for AI stocks. Financial media 7am: Stocks rise 1% as Democratic landslide is a relief for the economy. 🤡 🤡

Votes closing soon. Time to relisten to this absolute banger youtube.com/watch?v=3BrCvZmS… (Beware: this was NOT AI generated. Viewer advisory.)

Election day, and implied vol on $KRE, the regional bank ETF, is running way over realized. Front-end IV is in the 40s and 50s, while realized sits around 20. Our model gives a 73% probability that realized comes in below implied from here. The edge sits on the sell side.

Mag 7: +2.9% YTD. 2022 was −46%. This isn't that, but it's not the +60% of 2024 either. And $NVDA hasn't even reported Q3 yet. Who's buying here?

Friday VIX was up 6+ points, then down 4 into the close. And all weekend, we read the wildest explanations. Vol-of-vol is hot, and sometimes a move is just a move. Nobody writes a think piece every time $TSLA moves 5%.

Implied usually beats realized and nowhere is that messier right now than in VIX ETPs. In $VXX Dec 18 you have 92 IV vs 42 realized. Yes, the term structure is in backwardation. But that's still a 50 pts gap. What would it take for realized over the next 45 days to close it?