Here's a story that starts with Costco and ends with a broader question.

After a recent shopping trip I was telling a friend how good the Kirkland tequila anejo is. I was wondering which spirit brand they laundered the Kirkland name thru.
After some raving about Costco and how you can literally drop $300 there on a casual Friday morning and not feel bad about it my friend shared a story of Costco's buying power.
She was privy to Costco's dealings with the Hidden Valley brand. She told me that years ago Costco in an desire to be more healthy didn't want to sell a product with msg...the magic ingredient in HV Ranch dressing.
It turns out, the product has a cult following that can taste the absence of the magic ingredient.

Costco stood firm on its desire.

So HV spent nearly 2 years creating an msg-free recipe that was indistinguishable to the die hards.
That msg free version is only sold in Costco and only in those huge bottles. My friend was very impressed by Costco's power and how it wielded it.
(she also expressed regret that this new formulation didn't become the version sold everywhere but that's besides the point. Maybe the msg-free margins are terrible. Who knows)
Now this is a meatspace friend. No knowledge of Buffet-twitter-orgy over Costco. But from Twitter I learned that Costco limits its profit margin and seems to follow a sustainable strategy bc it maximizes long term value.
So is this story, or at least what I've heard, an example of ESG? Is there an ideological problem with how Costco wielded its scale in a competitive marketplace? Is this just best-case ESG used as a trojan horse to cover up less genuine examples?

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More from @KrisAbdelmessih

3 May
I'm with the octopus. I was thinking of what to write about Lily and honestly the octopus did a better job than I could expressing my feelings.

Every part of what octopus said too.

I've spoken to Lily a bunch offline as well. She is learning, trying, talented and generous.
Go back and read that last post she wrote about things that were said to her.

If for a moment you think being a woman doesn't play into this, I think your high.

I've never been treated even 1% as poorly as she has. And she's consistently nice and humble.
Hating on a 25 year old that isn't even running real money or doing anything except openly sharing her strategy is an especially crap look.

I think the zero-sumness of options has crept into some of your worldviews.

Did you lose by her gaining followers?
Read 8 tweets
16 Apr
Some general thoughts which keep coming up based on questions I get in DMs about option trades.

Novice traders/learners might find them discouraging but I think in the long-run knowing this now will help you plan your learning more efficiently.
There's 3 large categories of using options. Each has a very different starting point.

Be very aware which category your strategy targets.

1. Options as expressions of directional axes
2. Relative value volatility trading
3. Using vol flows to generate directional alpha
1. Options as expressions of directional axes

If this is your strat, then 95% of the work is upstream of your option implementation.

Your fundamental work may uncover a forecasted distribution that disagrees with the option surface.

Read 16 tweets
10 Apr
An example of why weekly vol is more volatile

Suppose 5 day option. Stock daily vol is 1% per day.

IV = sqrt(.01² x 5 days x 52 weeks) = 16.1%

Ok say 1 day is now expected to be 3% daily vol

IV = sqrt([.01² x 4 days + .03² x 1 day] x 52 weeks) = 26%

What happened?
The single day expected vol jumping from 1% to 3% means there is more variance in that single day then the remaining 4 days!

.01² x 4 days < .03²

For a longer dated option the increased vol from a single day (like earnings) is clearly diluted...
If the option had 2 weeks to expiry:

IV sqrt([.01² x 9 days + .03² x 1 day] x 52 weeks) = 21.6%

1 month:

IV sqrt([.01² x 21 days + .03² x 1 day] x 12 months) = 19%

So let's recap what happened when we inserted a single day of 3% vol to understand the risk...
Read 5 tweets
10 Apr
Explained to a learner in my DMs who underestimates the vega risk of a near dated option:

It's true that the near term option's vega is not large. But that is counterbalanced by the fact that near term IVs move faster (ie are more volatility then longer term IVs)
A 1 month ATM option has 1/2 the vega of a 4 month option.

But if the 1 month IV is twice as volatile it's the same vega risk.

Need to consider vega and the vol of vol.
(This is a doorway to a whole discussion about term structure and vega scaling but I'm not running down that stuff anytime soon...maybe @AgustinLebron3, @Ksidiii, or @volmagorov can thread one while sitting on a toilet)
Read 4 tweets
2 Apr
When I was a Susq I heard Jeff speak a few times. Always engaging.

They were savage in my days there but the doubling down on tech and brains thru the years probably makes Jeff the richest dude in the world you never heard of (unless you look at pol donations, then you know)
One of the talks was on the primacy of markets (Yass is an extreme libertarian, free-marketer, no fool should be allowed to keep their money type. Appealing views to many traders, esp when they are young)

This post was one of his market lessons.…
I remember when I was a 1st year mm on the Amex and I reported a giant trade that got crossed in AIG on the internal chat.

I got a dm.

"Pls call". It was from Jeff.

I was never so scared. Was I supposed to break that cross up?

Read 9 tweets
31 Mar
Intermittent follower farming (not sure what the endgame of this racket is...yet)

My finance ed threads and posts are all organized in "moments"

This is one of them:

⚡️ “Moontower's Market Meta Game Concepts”…
Here's another of a bit denser material...…
Here's stuff useful to anyone…
Read 4 tweets

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