Conifers 2020-01-24

During the week ending January 24, 2020, we have a conifer with a 29x return on the call-option side, and a 36x return on the put-option side. For names that are S&P 500 component companies, there were 4 companies on the call-option side, and 12 companies on the put option side. For calculations, I assumed buying the option on Tuesday Jan 21st (no data from Monday, options markets must have been closed for MLK holiday) and closing out the option on Friday Jan 24th. Below is a table grouping the calls vs. puts, and S&P 500 names vs. other.

Call OptionsPut Options
S&P 500Arista Networks (ANET)
Broadcom (AVGO)
Consolidated Edison (ED)
Intel Corp (INTC)
AbbVie (ABBV)
Alexion Pharma (ALXN)
Amgen (AMGN)
Bristol-Myers Squibb (BMY)
Carnival Corp (CCL)
CF Industries (CF)
Dow (DOW)
Edwards Lifesciences (EW)
Hess Corp (HES)
Marathon Oil (MRO)
Merck (MRK)
The Mosaic Company (MOS)
Other SLM Corp (SLM)Herbalife Nutrition (HLF)
Momo (MOMO)
Nutrien (NTR)
ProShares Ultra Crude (UCO)
US Oil Fund (USO)
ViacomCBS (VIAC)

A few quick observations. More names on the put-option side vs. call-option side. Most-represented-quadrant is the S&P 500 put options. Least-represented-quadrant is the Other (Non-S&P 500) call options. When a quadrant is over-represented in 10x options returns, then I wonder if that’s the area with the most market surprises. If so, the surprises of the week were S&P 500 names on the downside. Let’s go through these quadrant-by-quadrant.

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Conifers 2020-01-17

Last week’s conifers include a 93-bagger on the call-option side and a 23-bagger on the put-option side. Below is a table of all options bought on Jan 13th and sold on Jan 17th that returned at least 10x profit. The tickers are separated into 4 quadrants: call-options vs. put-options, and S&P 500 components vs. Other.

Call OptionsPut Options
S&P 500 Abbott Laboratories (ABT)
American Electric Power (AEP)
American Water Works (AWK)
Cardinal Health (CAH)
CarMax (KMX)
Carnival Corporation (CCL)
The Cooper Companies (COO)
Duke Energy (DUK)
Entergy (ETR)
Fox Corporation (FOXA)
The Home Depot (HD)
McKesson (MCK)
Mohawk Industries (MHK)
Morgan Stanley (MS)
PepsiCo (PEP)
Perrigo (PRGO)
Sempra Energy (SRE)
The Southern Company (SO)
TransDigm Group (TDG)
Visa (V)
YUM! Brands (YUM)
OtherAlcon (ALC)
The Blackstone Group (BX)
Dave & Buster’s (PLAY)
Entegris (ENTG)
Forty Seven (FTSV)
Ichor Holdings (ICHR)
Mallinckrodt (MNK)
Momenta Pharma (NTA)
NovoCure (NVCR)
Nutanix (NUT)
Pinterest (PINS)
Shake Shack (SHAK)
Signet Jewelers (SIG)
Sunrun (RUN)
Thor Industries (THO)
ProShares UltraShort Nat Gas (KOLD)
XBiotech (XBIT)
XPO Logistics (XPO)
Zai Lab (ZLAB)
Criteo (CRTO)
First Solar (FSLR)
MGP Ingredients (MGPI)
Sanderson Farms (SAFM)
Ubiquiti (UI)
U.S. Nat Gas Fund (UNG)

A few quick observations. There were no put-options on S&P component companies that returned at least 10x profit. I guess that means either the S&P 500 components did not drop very much, or put-options were already priced rich thereby limiting the return from out-of-the-money (OTM) options. Also I noticed natural gas ETFs showed up on both the call and put side, although the call option was for an “UltraShort” ETF. The non-S&P put-options included a few companies in biotech/pharma. I’m not going to cover all of these tickers, but let’s get into a few of them by looking at charts.

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Conifers 2020-01-10

The new year (2020) has barely started, and someone could have already made a 76x return in conifers. I introduced a new topic of conifers for this blog, borrowing from “The Dao of Capital” by Mark Spitznagel. The general idea is to track a certain unconventional class of investment that is shows underperformance the vast majority of the time, but occasionally has a chance to thrive and overtake traditional investment classes. The imagery is inspired by the survival strategy of conifer plants, which include Christmas trees, but in our case involve buying out-of-the-money (OTM) options. For today’s post, I am highlighting options that could have been purchased on January 2nd and sold on January 10th (year 2020). Let’s get into it:

Restructuring Energy Company


Source: (

Apache Corporation (APA) is an energy company headquartered in Houston Texas, and a component of the S&P 500 Index. On Jan 9th, the company announced the decision to close its San Antonio facility later this year. The stock was trading below 26 prior to the announcement and jumped above 32 after the announcement. There was a call option on APA with strike price at 28.50, expiring at Jan 10th, available ask price of $0.05 on Jan 2nd. The same option on Jan 10th had available bid price of $3.85. Assuming active trading on both sizes of the trade (taking the ask, hitting the bid), the total return was a 76x net return.

Source: Yahoo Finance
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Introducing Conifers

As we begin a new year in 2020, I want to write about a new topic that I will refer to as “conifers”. Conifers are discussed in Mark Spitznagel’s book “The Dao of Capital”, to explain an unusual investment strategy. Conifers (also known as gymnosperms) are a family of plants which include Christmas trees, that compete for resources against flowering plants (also known as angiosperms). These two families of plants (conifers vs. flowering plants) have two completely different strategies for surviving and multiplying in nature. Most of the time flowering plants thrive in normal growing conditions, while conifers severely under-perform. But certain conditions cause flowering plants to get wiped out, while conifers takeover scarce resources. Spitznagel explores the conifer as a teaching tool for a roundabout investment strategy.

For today’s discussion we can think of conifers as investments that under-perform in normal times, but occasionally have an opportunity to takeover scarce resources. A good example of the conifer strategy is investing in out-of-the-money (OTM) options. Most of the time, OTM options will expire worthless, but occasionally have an opportunity to overtake resources. For example in November 2019, there was a “conifer” with a 27,500% return in one month (that’s a 275x return). I have long been fascinated with out-of-the-money (OTM) options. My brother previously traded futures and options in the NYBOT pit. And after I briefly traded Eurodollar (short-term interest rates) futures on screens in 2007, I realized that OTM options could hedge a relative-value strategy during massive market dislocations.


Source: (

Source: Yahoo Finance

But first let’s talk about 3 books: Taleb (2001), Drobny (2006), and Spitznagel (2013).

When I read “Fooled by Randomness” by Nassim Taleb in the early 2000s, this book opened my mind to heuristics and fallacies, and how rare events can have a “life-changing” impact. At the time, I was learning to play small-limit poker in the underground casinos in New York, and so I was familiar with probabilities and expected values. I understood math in the context of poker strategies. But Taleb was talking about something different than “hitting a poker draw with pot odds” … he was talking about the equivalent of winning the World Series of Poker (an unlikely event that would be a life-changer). Taleb had built a career investing in “black swans”, which is almost like an extreme version of venture capital (where a single investment could return the entire value of portfolio). “Fooled by Randomness” is where the OTM options topic all started for me. I still think this book is Taleb’s best work, with “Antifragile” as my distant second favorite.

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