Kris Profile picture
Stay groovy 🤙DMs open 💡Twitter list curator 🎲Boardgames 👽Vol trading 🎸Guitars ✍🏻Weekly Letter https://t.co/ei9fHrCcpp
Matthew Mansfield Profile picture CRE Profile picture fasterlight Profile picture Faz Memon Profile picture Aloushka Profile picture 12 added to My Authors
14 Oct
Compiling questions like this that don't have as many moving parts as say evaluating a stock would make for a good quiz for money managers.

Like if you give managers a quiz where the inputs were a given (kinda like a constrained game) would they even get the answers right?
Like how many people hand their money over to someone whose bet sizes would be way off even if you accepted the inputs they furnished themselves?

Reminds me of a tweet about whether discretionary or quant would benefit more from the other?
I think its discretionary probably has more to learn from quant as far as not screwing up the more straightforward aspects of investing.
Read 10 tweets
12 Oct
I ended up using @potion_so to point my MoontowerMeta subdomain to my public Notion pages.

If anyone is looking to get a website up quickly and is already using Notion, just point your Notion to a custom domain and the URLs can be pretty while Notion is your CMS.
I'll be adding tracking so I can get stats for these public Notion pages just like WP or any other CMS provides.

I've had a bunch of Notion pages public including the Volatility Wiki but now the URLs just look tighter.
The landing page I use for my Twitter profile acts like a custom linktree but I designed it in Notion:

bit.ly/3lyBuqK
Read 5 tweets
7 Oct
Lots of new followers. Presumably option-curious.

A bit about me. I traded options on the floor for 12 years (8 at SIG, 4 with a backer). Mostly commodity futures and ETFs. Equities and indices very early in career.

Spent next 9 years a PM at a vol fund. Left trading in March.
I share stuff (non-alpha...more meta or basics that are less appreciated)

I'll put some resources in this thread for those that want to learn further:
My writing is hosted on my wordpress site MoontowerMeta. Blogs are chronological which is a crap format for this content so all my writing is indexed here.

notion.so/abdelmessih/Al…
Read 7 tweets
7 Oct
Felt cute and looked at some nat gas options on CME's website.

Let's go on a little ride to talk about trade prospecting.

We are going to need some background...

cmegroup.com/markets/energy…
The first thing to understand is the widowmaker spread in commodities is the famous H/J futures spread.

This was the football famously tossed between John Arnold's Centaurus and Brian Hunter's Amaranth.

@HideNotSlide did the story

frontmonth.substack.com/p/amaranthology
The reason it's a widowmaker is because the spread can get unruly.

The March future, henceforth known by its future code (H), represents the price of gas by the end of winter when supply has been withdrawn from storage.
Read 43 tweets
7 Oct
Protip

Scale price changes by implied vol and ignore noise.

Daily= change on day * 16/IV from yest

Weekly=change on week * 7.2 / IV week ago

Monthly= chg on month * 3.5 / IV month ago

Put your watchlist on the x-axis, enable barchart.
This is pretty much how I looked at all price changes. If the absolute value of any of the numbers was greater than 1 than the asset moved more than 1 implied standard deviation.

Set a filter for what size moves you want to see.

Clean way to look at how markets changed
This is what I call self-care
Read 5 tweets
5 Oct
New post:

Portfolio Theory And The Invisible Option On Hobbies

moontowermeta.com/portfolio-theo…
I start with a recap from a short post I wrote last year that encapsulates a few timeless portfolio theory lessons.
Which implies a subtle point:

The value of an asset viewed in isolation is actually a floor.

Why?

There is an invisible option that lives above that floor.
Read 7 tweets
4 Oct
Perhaps unpopular take:

It's a gambling hobby whitewashed as "investing".

The SNR is so bad that most "investors" in liquid names will never know if they had an edge.

I can save them them the anticipation.

They don't.

Their saving grace...
The vig is so tiny that they are playing blackjack for almost free. So the variance will swap the neg edge, encouraging winners to delude themselves that they are good at investing.

And from POV of giving the people what they want, it's working. Cheap casino.
Is this complex "blackjack" a good use of time? Probably as good a use a time as video games I guess.

If the entertainment we know as "markets" gets teaches you skills that's like getting comped by the casino host so much that you might come out ahead.
Read 13 tweets
1 Oct
There's so much that can be explained about what a mm thinks about and what tools they use when they handle a show. After so many reps the mental checklist and "feel" of the call is automatic but dissected it's prolly interesting to the corners of fintwit.
A really simple example would be someone soliciting a quote for a risk reversal. Take a symbol like URBN.

You are thinking about the class of customer the broker represents, where you are in the brokers pecking order.

Then you think about the stock itself.
What's the liquidity in the shares? What term do they want to trade? Are they looking to collar stock or disguising a skew trade? Well is it delta neutral or live?

How's the borrow? Confident in div dates? Are the screens stale or a good indicator of the fair vols for the name?
Read 15 tweets
30 Sep
I feel like I should make a video describing exactly what happens when a broker calls a desk with an option show.

Might be NSFW.

Seriously the signal chain from phone call, to the print on an exchange floor is not widely understood.

Announcement, crossing and blocking etc
The adverse selection of your order not being blocked. How the floor traders free roll off that moment. Why prop shops have people on various floors so they can block orders from crossing without getting their tribute.
Something important to realize is that anything represented by a broker on the floor of an exchange is considered "public" info since anyone can access that info by hiring a broker

Phone negotiations that result in an order/ trade are private until they are "announced" on floor
Read 11 tweets
30 Sep
Anyway, if you'd you'd like to check it out, here's what it covers:

1. Why I found Jensen's Inequality to be interesting in the first place (hint: it's a tool that helps you make better off the cuff predictions without crunching numbers)
2. Jensen's Inequality ELI5

This part includes a discussion of convexity/concavity and how this flips the direction of your predictions
3. I made up an example of trying to predict how long it would take to get somewhere in traffic.

I think everyone will have actually shared the same thought, but Jensen's formalizes the intuition
Read 5 tweets
27 Sep
A reminder that evaluating any performance requires comparing to a relevant control investment. That control should incorporate rebalancing and have the right vol scaling.

Some things you should wonder...
Does the manager have security selection edge, sizing edge, timing edge?

How do you test for these 3 edges...you need a sensible dummy benchmark.

Lots of room for details but you can listen to this pod to get your bearings

moontowermeta.com/notes-from-cap…
Scalability

Do money vs time-weighted returns tell us anything about the scalability of the strategy?

blogs.cfainstitute.org/investor/2016/…

(h/t @EconomPic)
Read 4 tweets
24 Sep
Friday musing before I hop off this app...

Is it inconsistent to be more compassionate to "horrible" people than to animals?

Animals that suffer seem to be a big monkey wrench in trying to hold together some worldviews.

A winding observation in the past week got me there...
I was at an exhibit in a museum in Danville that dealt with the opening of the US western frontier including the fate of native Americans.

It gets you thinking of course about how human cultures could evolve so differently.

But one of the ideas that I fixated on was...
The view to some tribes that owning land made no more sense than owning the air or water.

And the only thought that occurred (actually recurred, because I have it a lot) is how made up everything is. I mean rules and laws (not say physics...I mean we can build bridges and cars)
Read 9 tweets
24 Sep
2 games.

In one of them you roll a die and get paid whatever comes up. So if it comes up 4 you get $4.

What's that game worth to play?

Now consider a second game, where you ONLY get paid on a 6, but you get paid 21-1

What's that game worth?

News flash: VCs play game #2
Suppose there was a $10 strike call on both of these investments. What's it worth?

Ok I'll take 150 retweets, and a million likes now.
If someone managing money finds any of this "eye-opening" they are committing malpractice. This is what's known as a first round interview question for a 21 year old analyst role. There are no dumb questions, but if you have a seat and any of this is interesting I'm 🤯
Read 4 tweets
23 Sep
If your work makes you study companies and business models you build a deep pattern library to cross-reference a new idea against, adjusting for differences.

I totally lack this and it's a cool thing to have. Next best thing would be to lean on your friends who have it I guess
You can read and listen to pods to learn it maybe. You can even pick up some jargon that compresses some of the patterns (ie "melting ice cube"). But I wonder how far you can get without immersion of investing in companies.
When I hang out with friends (local dads) and shop talk comes up I'm always the one slowing it down "hold on what does that mean". A lot of it very credit/PE-sounding stuff, with more references to legal sounding stuff than I'm used to.
Read 7 tweets
16 Sep
Fwiw if the question was which accounts stretch or linger in me the most it's the more progressive/shitpost accounts.

@SkeleCap
@NewRiverInvest
@JessicaNutt96
@quantian1
@LadyFOHF
@TheStalwart

Provocative but not progressive
@zackkanter
And then there's accounts I just kinda love for being amusing/provacative in a positive way

@vgr
@SuperMugatu
@visakanv (who's spirit most resonates with me and I aspire to but I'm neither as smart or as kind as him)
@p_millerd
Rando

My career has mostly been surrounded by Ayn Randian types but some of the absolute smartest people I've seen in this biz are very progressive and kind of black sheep and I've always been intrigued by genius idealogues.

On one hand you have what Munger says about them...
Read 4 tweets
14 Sep
What will a 95th percentile return for single stock be in the next 6 months be?

What if we restrict to optionable? Anyone have a dashboard that can ask:

"5% of names have an N(d2) of at least 3x"

but 3x is a threshold you can move until you capture 5% of the universe
Because it's optionable I think that sets a floor for what the true 95th percentile return will be since the investable universe for this contest is all stocks.

But I presume that at least half the kids won't realize that picking a recognizable name won't cut it....
Meaning the probability that any kid picks a name that finishes in the 95th percentile is probably small.

Using this to think about what range of implied odds to look for in a biotech. A name that has 5x potential is probably unnecessary to strive for but 2x prolly not enuff
Read 4 tweets
11 Sep
Not in the same league, but have a distant relative that owns a bunch of buildings in LA (he lives in a Santa Monica house that was worth $5mm 20 years ago).

When I asked him about anything related to business, he just says Jesus tells him what to buy.

The lesson...
Time machine to the 1970s and start buying everything in CA.

My family considered moving to CA in the late 79s early 80s when I was living in Brooklyn. I was 4 years old when they scouted the Bay Area.

Parents couldn't land a job there. We settled in NJ.
They bought a house for $70k. My mom remembers camping out bc you could get a early bird mortgage for 13% instead if 14% or something like that.

Anyway, that $70k house is only worth about $400k today. Throw 2% RE taxes and it has been an awful financial investment...
Read 5 tweets
7 Sep
A rhetorical product idea

A fintwit-raised dashboard of dashboards (kind of like layouts in Bloomberg/TradingView/Koyfin/Excel etc) where individuals shared:

🌡️their dashboard
🧠the reasoning for what's on it
⏱️the timeframe/decision the metric informs
i say "rhetorical" since it would not make sense for people to contribute to this...but maybe. I think I could have shared every one of my dashboards and what my positions were and i think almost everyone would still f it up...
since the strategies are ultimately discretionary and sizing, gameplan, and relationships are important

But the dashboards themselves are useful base rate starting points esp since they narrow from the infinite
Read 4 tweets
7 Sep
Reading this post and thinking that a "scrub" from the gaming world is the exact definition of investors who care more about being right or what's right than making money.

sirlin.net/articles/playi…
Read 4 tweets
7 Sep
This is from @ByrneHobart post-mortem of his tuition aka the div futures trade

diff.substack.com/p/the-dividend…

I appreciated how he qualitatively spells out why shorting stocks as a hedge changed the trade.

(you can also see it as short term structure trade with a fixed near expiry)
A lazy treatment would simply calibrate betas of near and long-dated futures and short a ton of stock since you are long the high-beta short end of the div term structure...but Byrne wasn't lazy about the idea.

He intuitively understands that any calibrated beta is...
...sensitive to the volatile measuring period we were going thru.

So instead, his intuition focuses on what matters. The fact that the beta (which is an input to the hedge ratio) itself is volatile and what the trade really cares about is the slope or rate between...
Read 5 tweets
31 Aug
"I know rich people who bot [insert any asset levered] and they play 67 rounds of golf a week now" is a really cool brand of tweet.

Keep em coming, I don't want to forget how garbage our tax code is.
I don't golf but I can only imagine how many convos rich people have around the 9th hole when everyone's had a beer, is nice and loose, and safely politically sorted about how much fiscal stimulus is destroying this country.
Don't worry rich dude, if you've played Monopoly you know that an airdrop of money in the endgame just ends up as a rent check in the mail. Nothing really changes except which rich dude's snapshot holds the crown when the winners split the pot
Read 4 tweets