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Kris Profile picture
Kris
@KrisAbdelmessih
Stay groovy 🤙DMs open σ https://t.co/p0ss9OuitP 💡Twitter list curator 🎲Boardgames 👽Vol trading 🎸Guitars
32 subscribers
Apr 20 • 8 tweets • 2 min read
Quick thread extracted from today's letter

If they ban short-selling derivatives become the underlying A reminder in the spirit of being attuned to seemingly far-fetched risks:

If short selling were restricted in any way, the value of puts relative to calls on the same strike increases in a put-call parity framework.
Mar 24 • 14 tweets • 4 min read
A little thread of fun intuition for option probability based on yesterday's letter

A couple weeks ago @dampedspring posted: Image By saying I’d buy that proposition I’m saying “I’d buy that vol”

Andy, responded with a joke about what’s the “one touch” option worth, which I asked him to delete because I really would have liked a fool to sell me that proposition and Andy’s comment gives away the sauce.
Mar 17 • 40 tweets • 6 min read
On "surfing volatility"

I narrated some of my IBIT trading last week streams. Expiration on Friday went well but I want to zoom in on the experience broadly because it’s a classic flow of what vol trading looks like... Just for recap Image
Mar 12 • 30 tweets • 5 min read
Threading today's letter...

I was out Monday night in SF with friends from Parallax and we realized it’s been exactly 4 years this week since I left. I gotta tell you, while I don’t miss having the job, I deeply miss the people. I deeply miss being an office (although I don’t miss the commute or the 4am mornings). I reference the film Clerks all the time, but my professional life felt like Clerks.
Mar 6 • 4 tweets • 1 min read
Stock up, vol up

best performers relative to their vol in the past week

germany, FEZ, euro

so...immediately your instincts should make you ask... Image did the put skew invert?

spot down is stabilizing to vol relative to spot up

looking at the May expiry (closest to 60 dte) the 25d put skew is 75th percentile (1 yr lookback) and the a 15% premium to at-the-moneys Image
Feb 5 • 22 tweets • 5 min read
Procrastinating a bit this am so here's a thread based on today's letter.

@AFwithNick and I chatted back in Dec and he asked:

Isn’t every life decision essentially a vol trade?

I did the thing where you re-frame the question to one you prefer to answer... What can option theory teach us about decision-making in general?

My response started:

I'm gonna piggyback off some of my training. I started at SIG, and famously—or infamously, at least in our little world—
Jan 22 • 6 tweets • 2 min read
I just finished @justinskycak book The Math Academy Way.

One of the coolest concepts is the interplay between spaced repetition and compressing what you need to review by understanding the linkage between concepts.... He explains the difference between an encompassing graph and a prerequisite graph. You are already familiar with the latter. The former whoever is not the mirror image. You may need to know X to learn Y, but by reviewing Y you may NOT have implicitly reviewed X...
Jan 4 • 10 tweets • 2 min read
First tagging @moreproteinbars for the QT chain

Ok

worst trade: short ng futures vol vs long ung when UNG put a moratorium on creations. ETF went premium to NAV. When gas futures dropped UNG didn't move. Premium widened... When gas futures rallied UNG also didn't move. The premium just narrowed. I was short options on the thing whipping around every day and long options on molasses.

(This happened in 2011. The experience prepared me for connecting dots quickly in 2020 USO)
Dec 13, 2024 • 36 tweets • 6 min read
Yesterday I published Path, VIX, & Hit Rates vs Expectancy

I'll thread some of the free portion... We start with VIX.

The CBOE’s VIX index interpolates 30-day implied volatility based on options struck on the SPX index.

A VIX future settlement price is based on the prevailing VIX index at the future expiry date.
Nov 10, 2024 • 17 tweets • 3 min read
Thread version of a post called:

why selling an option because the “stock will never get there” is amateur vol thinking In stepping through an oil put trade, I wrote:

As a junior trader I remember selling calls because “it’ll never get there”. I promise you there are many people who think like that. They don’t understand vol trading.
Oct 12, 2024 • 14 tweets • 3 min read
This post is fine, reasonable posture.

...but if I may piggyback off some of the numbers in the post...

I want to repeat what the post says but with slightly different emphasis which leads to a large difference in framing. Image For example, it talks about people being in the top 5% of income or wealth being disappointed and you'd be better off having going in with lower expectations.

When I think the harsh but true reality is being in top 5% when you measure against the whole population just...
Sep 30, 2024 • 35 tweets • 9 min read
Yesterday I unlocked a paid post that might have broad appeal

a deeper understanding of vertical spreads

thread version... In part 1, we tackled a common problem without the use of an option model:

Assume SPY volatility is 16% and we want to hedge using a 1-year put.

2 questions emerge

✔️What strike is 1 standard deviation down?
✔️What’s the cost of that put?Image
Sep 8, 2024 • 13 tweets • 4 min read
A thread zooming in on a section of today's moontower...how arbitrage pricing creates opportunities for directional investors it starts with a reader question about a common source of confusion -- why cheaper OTM calls (ie lower call skew) leads to more expensive call spreads and a higher probability of the stock going upImage
Aug 29, 2024 • 18 tweets • 3 min read
Thinking a bit about how certain fields and crafts and the extent to which the intensity of the enabling technology acts as a career or skill shock absorber...to be more concrete I was thinking about writing vs other fields... STEM fields even if you stay in the theoretical force you to learn programming. If you make movies, music, photography there's an aspect of technical + technology that comes with the territory even if it's not the focus
Jun 14, 2024 • 17 tweets • 3 min read
Sharing the monkey thoughts as i mess around in GME...

I'm long that 20 lot of June 20/30 call. Despite the stock being down today, the 30s are eroding + vol is declining so it upticked in value...

also looking at the june 20/25 call spread... the spread value has increased a lot. The vega on these options is small but not totally negligible. So look at the IV spread...it's fallen 14 points today on a spread with a penny of vega - that's a 14c rally in the spread on a delta deutral basis! Image
Jun 11, 2024 • 13 tweets • 3 min read
Messing around a bit. Used an option calculator and ran 300% flat vol sheets vs skewed vol sheets that roughly fit the market just to see how different the distributions are (stock ref $25 in $GME)
Image Fly density is just butterfly centered on the middle strike divided by the strike width. This is why vertical spreads are model free bets on the distribution.

A lot of call skew or vol pushes the modal outcome to the left. High call skew makes call spreads cheaper...
May 29, 2024 • 9 tweets • 2 min read
Enjoyed this thread that decontructs charisma.

Been listening to Founders episodes a bunch and one example that seemed to pop out a bunch was Coppola. Magnetism to spare. Helps that it's got a healthy dose of Wooderson.

On a related note, listen to Foxx on Ferris podcast. The stories are just bonkers. Listen to McConaughey Greenlights audiobook. It's so magnetic.
May 6, 2024 • 28 tweets • 5 min read
Moontower this week was effectively subtweet of all these kinds of tweets.

The tweet says nothing we don't already know while manufacturing urgency with a totally worthless "is due"

My evergreen response which despite being evergreen is actually actionable... my personal allocation sizes relegate “expected return” to the back burner. I roll with the assumption that systematic risk is irreducible and beta returns aren’t compensation for labor/research but patience and pain tolerance. It’s a weird circular argument:
Apr 23, 2024 • 22 tweets • 5 min read
A Demonstration of VRP Normalizing

One of 's "top of funnel" charts is a scatterplot of VRP (volatility risk premium) vs realized vol percentile

We are going to hindsight the chart to show how BTC vols anticipated the last month's moves...moontower.ai while also being "overpriced".

First a refresher on the Real chart:

Y-axis plots the VRP defined as 1-month IV / trailing 30 day realized

X-axis is the percentile of 30 day realized compared to its own historymoontower.ai
Apr 10, 2024 • 23 tweets • 7 min read
A Moontower reader asked a question that gets into one of the most confusing topics for option traders: Image I know firsthand from watching people wrestle with option models that this topic has put many brains in a blender.

Let me take a stab at it.

Let's level-set with some basics: Image
Mar 27, 2024 • 13 tweets • 3 min read
I feel left out of the avengers (ht @choffstein) thread.

I'll add a few ideas for bystanders who already had an opportunity to learn a lot about options pricing from the outstanding replies.

Here we go... 1. As the put decays (or if vol falls enough) on the strike of the ITM calls, the extrinsic premium will evaporate. The carry to holding the long calls at intrinsic against short stock will be more expensive than the extrinsic of the strike.

So what happens?