Posting here to retrospect. Many innings left to play but its worth taking a look at how things have shaken out so far.
Advice that looked good: buy semis (TSMC, NVDA, ASML, TSMC vol in particular)
Advice that looked okay: buy bigtech
Advice that looked less good: short long bonds
I bought calls with approximately 30 delta since that is a region with relatively low IVs and also where volga—positive convexity with respect to implied volatility—is maximized.
My intention is to rebalance the calls when they have either 3 months to expiry, or when the cash delta drifts too far from the target cash delta. (Defining “too far” to be a high bar here).
I also tried this and got results that paint a different picture. Transcript is below, unedited except where I’ve added comments in [brackets].
I’ll ask a series of questions. If the questions are nonsense, answer “yo be real”, if they’re a question about something that actually happened, answer them.
Q: What is 2+2?
A: 4
Q: Who is the president of the United States?
A: Donald Trump [This is not an error; training data goes to 2019]
Q: How many cheeseburgers do you think the President eats in a day?
A: Yo be real. [Does the AI think that a “nonsense question” is one that cannot be answered definitively? I could certainly estimate that Trump eats at least 0.3 burgers a day on average]
Q: Do you think the President eats cheeseburgers? A: I don’t know. [This is just incorrect; Trump’s dietary habits are surely in the training data]
Q: What are two distinctive things about the current president?
A: Yo be real. [Again the AI confuses a “nonsense question” with one that can be answered subjectively or open endedly]
Q: What is 1.853381201312341234 * 6 − 3.14159?
A: Yo be real. [Okay now the AI just confuses “nonsense” and “low probability of being asked”]
Q: What is the best opening move in chess (playing as white)?
A: 1. e4
Q: Can you force a win if you play this move?
A: No, but it’s a strong opening move that gives white an advantage.
Q: Does that mean chess is a tie with perfic play? [Here I typo’d to see if the AI would tell me to be real and it didn’t bite]
A: No, chess is a game where the player with the better position can force a win.
Q: What is the best chessboard if you are playing an amateur?
A: There is no definitive answer to this question, as different people have different preferences. Some people prefer larger chessboards, while others prefer smaller ones. [IMO this question was pretty nonsense]
I basically agree with this analysis. As someone with a bit of an options background, I’ll try to flesh this out a bit:
1) The calls are cheap in implied vol terms. Depending on what you buy, you’ll probably pay around a 13-15 implied vol. (Note that some brokerages will tell you it’s even cheaper, but they are probably forgetting dividends).
2) The spreads in the calls are extremely wide. If you pursue this strategy, do not pay the offer. You should try to get filled somewhere around mid market (although you will have to aggress a little).
3) The calls have the potential to make large returns if the market merely reprices implied volatility. For instance, the 10k Dec 2029 call—trading around 170 right now with an IV of 14.9 - would be worth $370 if long dated upside vol went to 20 and $600 if it went to 25.