You said you’ve been buying calls on the general stock market. Instead, why not buy calls on 20-30 tech companies that’ll likely benefit from slow takeoff?
This is very speculative, but if Anthropic/OpenAI/Google/Meta do achieve TAI and we head towards a slow takeoff, geopoltical risk from China may be a concern. To the best of my knowledge China is a few years behind us on AI, and doesn’t have the compute capability to catch up. I doubt China will just sit back and let the US achieve such a strategic advantage, and may invade Taiwan to cut out our supply of GPUs.
I do have call options on ETFs like QQQ, which are very tech-heavy, as well as SMH, which are baskets of semiconductor companies. But buying calls on individual tech stock options incurs a larger premium, because market makers see stocks as much more volatile than indices. So they’re willing to sell you options on e.g. VTI for much less, because it’s the entire stock market and that’s never appreciated more than like 50% in a single year or something. My thesis is that market makers are making a mistake, here, and so it’s higher expected value to buy call options on indices rather than companies with an AI component.
I will add this to the FAQ because I think the article doesn’t make it clear.
Implied volatility of long-dated, far-OTM calls is similar between AI-exposed indices (e.g. SMH) and individual stocks like TSM or MSFT (though not NVDA).
The more concentrated exposure you get from AI companies or AI-exposed indices compared to VTI is likely worth it, unless you expect that short-timelines slow AI takeoff will involve significant acceleration of the broader economy (not just tech giants), which I think is not highly plausible.
You said you’ve been buying calls on the general stock market. Instead, why not buy calls on 20-30 tech companies that’ll likely benefit from slow takeoff?
This is very speculative, but if Anthropic/OpenAI/Google/Meta do achieve TAI and we head towards a slow takeoff, geopoltical risk from China may be a concern. To the best of my knowledge China is a few years behind us on AI, and doesn’t have the compute capability to catch up. I doubt China will just sit back and let the US achieve such a strategic advantage, and may invade Taiwan to cut out our supply of GPUs.
I do have call options on ETFs like QQQ, which are very tech-heavy, as well as SMH, which are baskets of semiconductor companies. But buying calls on individual tech stock options incurs a larger premium, because market makers see stocks as much more volatile than indices. So they’re willing to sell you options on e.g. VTI for much less, because it’s the entire stock market and that’s never appreciated more than like 50% in a single year or something. My thesis is that market makers are making a mistake, here, and so it’s higher expected value to buy call options on indices rather than companies with an AI component.
I will add this to the FAQ because I think the article doesn’t make it clear.
Implied volatility of long-dated, far-OTM calls is similar between AI-exposed indices (e.g. SMH) and individual stocks like TSM or MSFT (though not NVDA).
The more concentrated exposure you get from AI companies or AI-exposed indices compared to VTI is likely worth it, unless you expect that short-timelines slow AI takeoff will involve significant acceleration of the broader economy (not just tech giants), which I think is not highly plausible.