Buying Undervalued Insurance With A 35x Potential Pay Off

Here's how I'm (metaphorically) buying fire insurance on a burning house.

After my chat with Chapman Scarborough I was encouraged to look into a short position we discussed in our recent podcast together.

Full credit to him on this one, I found it intriguing and am sharing how I’m playing it below. For a more detailed summary I highly suggest subscribing to his stack here

Key notes:

• I explain the mechanics/philosophy of expressing bearish views via options in an upcoming video so don’t stress if this doesn’t make sense - probably best for beginners to steer clear of this strategy anyway.

• Shorting is simple in theory and yet notoriously difficult to pull off in practice. Here I’m merely using it as a tool to get a potentially asymmetric payoff which is uncorrelated to the market i.e. payoff is multiples of entry cost and in the event of a market downturn, the expected profits on this would provide beautiful cash which I could use to add to my favorite positions should they in turn sell off.

So straight to it then: