1/27 Recap

Some incredible candles today in the market. The AI theme got upended with panic from the Deep Seek R1 release recently, the media picked up the story along with fintwit and the panic set in. China has built an LLM for dramatically less than we have. Now is the AI race about LLM’s? No, and the panic is about whether our megacaps are overspending and have we gotten ahead of ourselves on how much compute is necessary. I would say no to all the above, the end goal is AGI, not these LLM’s and these megacaps are run by brilliant people. Is there waste? Sure, but when they say they need $60-80b a year on capex, they need it. Regardless, for today, the match was set and short term NVDA was decimated along with other semis. Even the power names that had run so hard on the AI thesis were smoked. Panic was everywhere but I do think if we accelerated the AI timeline, we need more GPU not less as we go forward. The problem with a name like NVDA is now that everyone is gigalong the name, there are going to be rug pulls and short attacks, oddly this all happened during the quiet period for NVDA. Whatever it is, China has not won the AI race and our megacaps have plenty of cash and talent to learn from this and compete.

The SPY broke down hard as NVDA and MSFT really crumbled. MSFT of course has the OpenAI investment that is now at potential risk of being a write down in time. We tried to come back over this confluence of the 21 ema and the 50 day while rejecting the 8 day and we’re just in no man’s land now. We still have the fed and earnings this week so this seems like a natural thing to occur before all that. The story this week will be the closing candle on friday and how the weekly candle looks after everything is out of the way. Right now, the next support is that 100 day average below just below 585. One sector that people appear to be rotating to is software as lots of those names are very green today. So keep the IGV on your watchlist if this panic continues.

Recent Trades

PEP - I wrote up Pepsi 2 weeks ago here as a weekend best idea because it was at a great spot and a defensive name if the market ever got hairy. Today we got that down move in tech and sure enough PEP did the defensive thing rising 3% to 153.59 right now, this is almost 9% in 2 weeks, on a name like Pepsi that doesn’t really move. Those January 2026 $115 puts I suggested below have gone from $3.15 in to $1.60 in 2 weeks and you can close them up today if they’re taking up too much margin. You can’t ask for much more than 50% collapse in 12 month long short puts.

My Open Book

My hands are a bit tied now because of the margin requirements of the puts sold on my META trade friday, so realistically until META goes up and those requirements fall a bit, I can’t really make any moves. Balancing your margin is a tough act but I do like the trade because they added 20,000 more of those max strike calls today as you’ll see in the table below and look at META itself, it is green as the /NQ is -700. That sort of relative strength coming up $50 off the morning lows is really impressive. I won’t waste time posting this daily unless I add something but I don’t see myself adding anything soon, we will see after META earnings this week, if they go poorly I may have to take off some short puts to alleviate margin pressure, but otherwise I added 10 more today to my risk reversal and I paid around $6 more than I did on friday but I’m happy with the price action and am somehow green even with Amazon down a bit for me.