Interview
Slow, Medium, and Fast Money Strategies · Cody Yeh
- Expects AI to effectively replace trading roles if Delta strategies reach peak complexity, noting that variables such as Black Swan events, FOMC decisions, and Donald Trump announcements can instantly invalidate probability calculations within a single day.
- Anticipates a market bottom only after corporations officially announce a recession, a process forecasted to take one to two months, with the S&P 500 potentially dropping to 5,200 and experiencing further downside or neutral-to-bearish conditions.
- Forecasts a multi-year presidential reset where the first year involves a market reset and rate cuts, with stocks rebounding that same year; the second year sees rate drops continue, leading to a significant rebound in the third and fourth years.
- Predicts the S&P 500 will drop 10% one to two times every one to three years and expects 60 to 70% of years to be flat or downward trends where his strategies outperform, though they will lag during extreme "crazy up market" years.
- Advises traders to reduce account size and "set and done" strategy expiration dates to two to six weeks to manage fast-moving markets, while noting that option premiums more than double when VIX rises from 15 to 30 and quadruple when rising to 60 due to gamma acceleration.
- Reports that his "set and done" strategy targeting 10 to 20 percent annual returns generated 36 percent during the 2021 to 2023 flat and downward trends, aiming to break even even if the market drops 10% to 20%, unlike "buy and hold" portfolios that suffered losses.
- Plans to dodge specific high-risk events like "liberation day" by leaving potential gains unclaimed to avoid catastrophic losses, acknowledging an ability to dodge only 90% of wild card events while accepting the 10% impact.
- Restricts investment to companies with market capitalizations above $20 billion (potentially $50 billion), excluding OTC stocks, and relies on the top 10 holdings of prominent investors like Warren Buffett and Jim Simons for high-conviction option selling.
- Warns that leveraging via security-based lending risks margin calls if assets drop more than 50% and defines a 90% asset decline as a failure state, noting that hedge funds average blowing up accounts once every four years.
- Identifies the primary challenge as anticipating disruptive events involving Donald Trump or structured calendar occurrences, adjusting positions based on capital exposure limits rather than precise probabilities when such variables threaten Delta calculations.