I don’t want to torment you this week, but if you trust me play along and you’ll be paid off with some non-obvious lessons. Imagine the wish you made on your 10-year-old birthday candles comes true. You are magically given $1,000,000. But there’s a catch. You must expose it to either of the following risks: 1) You … Continue reading The Volatility Drain →| Party at the Moontower
While our exchange students bid us farewell yesterday, this week, much of my east coast fam is visiting to celebrate a cousin’s wedding in Napa. It’s a nice season to get married. In fact, Yinh and I celebrated 16 years on October 2nd 🙂 I mentioned my wife’s pet project about money matters. As you … Continue reading Do my wife and I have separate accounts and other personal money questions→ The post Do my wife and I have separate accounts and other personal money questions appear...| Party at the Moontower
For the second time in three years, we participated in a program to host Japanese exchange students for a week. We do it through local org that brings students a few times a year. Our guests were 2 16-year-old boys, Yuki and Haruto. Here’s how it works: After some vetting, the org matches you with … Continue reading exchange student week→ The post exchange student week appeared first on Party at the Moontower.| Party at the Moontower
Friends, If you read nothing else in today’s letter, hear me now: THANK YOU. Thank you from me. Thank you from my good friend Jamie’s entire family. Words cannot rise to the occasion. You will recall a March issue titled Moontower Unite: I got a distressing text on Tuesday. A close friend I grew up with … Continue reading Moontower #287→ The post Moontower #287 appeared first on Party at the Moontower.| Party at the Moontower
Most people who get into options are seduced by levered returns, but for the relationship to go from a fling to the real thing, they commit to learning about “vol”: implied vol, realized vol, vol surfaces. I’ve declared that options are ALWAYS about vol. This is snobbery to the same degree as reserving “champagne” for sparkling … Continue reading the easiest win in options is for stock traders→ The post the easiest win in options is for stock traders appeared first on Party at ...| Party at the Moontower
I referenced one of Kevin’s articles about funding trades in Thursday’s letter. I have several of Kevin’s tweets saved. This one is a counterintuitive argument for why the stock’s left tail is probably smaller than you think. In a June 9th tweet, Kevin considers one of ASTS insider sales: Scott W sold 50k shares today. Here are … Continue reading Insider selling that’s…bullish?→ The post Insider selling that’s…bullish? appeared first on Party at the Moontower.| Party at the Moontower
For Friday’s family pizza/movie night, we finished watching the 1978 Superman starring Christopher Reeve. It’s one of my favorite movies, so I was nervous it would feel too outdated to the kids, but phew, they approved! My older kid likes rocks and crystals, so he loved the “programmable” sunstone that acts as a telecom, computer, … Continue reading reality is more than memes→ The post reality is more than memes appeared first on Party at the Moontower.| Party at the Moontower
Friends, For Friday’s family pizza/movie night, we finished watching the 1978 Superman starring Christopher Reeve. It’s one of my favorite movies, so I was nervous it would feel too outdated to the kids, but phew, they approved! My older kid likes rocks and crystals, so he loved the “programmable” sunstone that acts as a telecom, … Continue reading Moontower #286 →| Party at the Moontower
When I was trading trainee we used to play a put/call parity game to sharpen our mental arithmetic. I used to get perfect accuracy in the 30-40 second range at my best. My friend Tina was the firm champ at about 18 seconds. Just over 1 second per question. Being fast was a job requirement, but you … Continue reading the difference between 99.8 and 99.9→ The post the difference between 99.8 and 99.9 appeared first on Party at the Moontower.| Party at the Moontower
Yet another vibe-code project. This one went viral because…it’s a game! It’s a replica of the one we trained on an eon ago at SIG. It’s a put-call parity game. The formula for put/call parity is: C = (S - K) + P + RC where: C = call value P = put value S … Continue reading Learn put/call parity with this free game→ The post Learn put/call parity with this free game appeared first on Party at the Moontower.| Party at the Moontower
My friend Khe has been working with hedge funds and Wall Street firms to help their teams get more out of LLMs (his weekly letter How To Future-Proof Your Career with AI is consistently practical. On a personal note I feel like Khe’s cadence is about 1-month ahead of my own LLM-discovery arc. I’m just getting started … Continue reading i can’t wait to replace myself→ The post i can’t wait to replace myself appeared first on Party at the Moontower.| Party at the Moontower
More educational stuff today, much of which you can share with your kids or just explore for yourself. Last Monday night, I taught a group of kids (and parents) from the neighborhood and social club a trading game as well as exercises to demonstrate how confirmation bias is always lurking even when a topic isn’t emotional. I … Continue reading Moontower #283 →| Party at the Moontower
I used a pattern to explain it to my 12-year-old on our car ride on Monday. Start with: 8*8 = 64 Let’s call that a * b It feels like if we subtract 1 from a and add 1 to b multipy it should be close to 64 7*9 = 63 Close but a tad lower. What if we keep … Continue reading how I explained vol drag to a 12-year-old →| Party at the Moontower
Friends, Let’s stay with the education theme as we’re still with a week of the new school year. We’ll lean towards finance though… This is a re-print from the Gappy (head of quant research at Balyasny) LinkedIn: Yesterday I was talking to a very smart high-schooler interested in finance, and the topic of college major came … Continue reading Moontower #282 →| Party at the Moontower
I think, at a child’s birth, if a mother could ask a fairy godmother to endow it with the most useful gift, that gift should be curiosity. – Anna Eleanor Roosevelt A fitting quote for a person whose life was so full and exemplary she was bestowed with 35 honorary degrees. 4 more than FDR according to the … Continue reading Thinking “fat” as a form of hormesis →| Party at the Moontower
Friends, I’ve been saving this one for the start of the school year. For those who start after Labor Day like it should be (my kids have been in school for nearly a month already). I took my boys to Alpha School in Austin during Spring Break this year. School during Spring Break, dad?! Yea, … Continue reading you need motivation to learn the value of pain →| Party at the Moontower
Last week in Adam Smith’s Backdoor, I wrote: The promise of capitalism is its swarm intelligence that maximizes benefit under the curve for the plurality of its members, as opposed to the narrow interests of a corruptible centralized authority. If the “plurality of its members” see the gains as gilded with appeals to capitalism feeling like they are in service … Continue reading capitalism is a temporary condition →| Party at the Moontower
Notable short seller Andrew Left’s firm Citron Research gave his “all roads lead to $40” pronouncement on X this week regarding PLTR 2.90%↑ : Created with TradingView Give Palantir the same $100 billion valuation that Databricks just earned. Where does that put the stock? $40. The exact same math we saw when comparing Palantir to OpenAI. Tyler pinged me before the stock dove … Continue reading Betting on PLTR to $40 →| Party at the Moontower
This summer we started a family tradition — Friday night pizza and movies. Each week we rotate who picks the movie and the pizza place. A few weeks ago, we did a Matthew Broderick double feature. We started with Ferris Bueller’s Day Off. Turns out I don’t remember seeing this movie before. I just thought I … Continue reading Adam Smith’s Backdoor →| Party at the Moontower
A conversation with Claude Opus 4 KA: What is the compact formula for daily option pl that relates realized variance – implied variance? The compact formula for daily option P&L that relates realized variance to implied variance is: Daily P&L ≈ ½ × Vega × (σ²_realized – σ²_implied) × Δt Where: Vega = option’s vega … Continue reading Sparring with AI: Theoretical options p/l vs discrete hedging →| Party at the Moontower
In the discord, I was asked a good question that’s lingered for me. I’ll share the fuller response here but first the question:| Party at the Moontower
Link: http://investorfieldguide.com/livermore/ About Jesse: Jesse Livermore is a pseudonym for the financial blogger behind philosophicaleconomics.com. 3 Methods for Drawing Meaningful Inference Intuition Benefit: Low cost and readily accessible Costs Downside is noisy especially in ‘wicked’ learning environments Not transparent Traders are high in ‘cognitive reflection’ and stronger intuition Careful deliberation is a hallmark. Studies have … Continue reading Notes from Invest Like...| Party at the Moontower
I was chatting with a quant friend who was bouncing an options idea off me. In the course of the conversation, he was surprised I did not assume the .50 delta option was the ATM (at-the-money) option. My friend is much smarter than me on finance stuff but options aren’t his native professional language. So … Continue reading Lessons From The .50 Delta Option →| Party at the Moontower
Just based on my local observations, it still feels like the bid-ask on residential real estate is wide. I wrote Staring Out The Window in October 2022: Musing #1: Bid-Ask Widening A year ago the people that paid ridiculous prices for RE were market orders. “Fill me at any price”. Many of them were immediately in the … Continue reading why home prices could fall with mortgage rates →| Party at the Moontower
In this post, we will learn what it means for a position to be convex with respect to volatility. In preparation for this post, you may want a refresher. Vega is the sensitivity of a P/L to changes in volatility. This is the exposure volatility traders are taking active views on. It requires tremendous attention … Continue reading Finding Vol Convexity →| Party at the Moontower
Humans are not good bettors. It takes effort both in study and practice to become more proficient. But like anything hard, most people won’t persevere. Devoting some cycles to improve will arm you with a rare arrow in your quiver as you go through life. Skilled betting demands 2 pivotal actions: Identifying attractive propositions This can … Continue reading Bet Sizing Is Not Intuitive →| Party at the Moontower
I’ll start this week with an abstract idea I’ve been sitting on in my notes for years. And then I’ll take you through the concrete idea that gave it life (and a reason to publish it). The Abstraction Sitting In My Notes Communism doesn’t scale but it can work in small settings where the bonds and … Continue reading I Swear It’s Not Old School →| Party at the Moontower