In this issue:
- blindsided
- “end behavior”
Friends,
Blindsided
My cousin Nicole just had her first child in the past year and is now compiling resources for new parents in light of where her attention has obviously been.
In our family chat, she asked:
When you became a new parent, what blindsided you the most?
I’ll share my answer, which I qualify with both the awareness that having a child is a gamble on many levels and that conception itself is a miracle and should never be taken for granted. What was I blindsided by?
[9:16 AM, 9/16/2026] Kris Abdelmessih: that they were gonna be so awesome
[9:17 AM, 9/16/2026] Kris Abdelmessih: that last one is important when we live in times where people have less kids and talk about it as though it’s a chore (it is) but not the amazing upside
The most transcendent single moment of my life thus far was to hear my son’s voice the day he came into the world. I don’t know if that’s every parent’s experience, but immediately I felt the joy and clarity of purpose. Before that cry, I don’t think I would have said I had no purpose, but the moment revealed that I didn’t believe I did. The speed and intensity of this rush of belief was a novel feeling. Thus, irreparably blindsided.
Share your own answers in the comments and I’ll share them with Nicole. Thank you!
I offered a couple of less serious answers to her question as well.
On that last one, I wrote about that 2 years ago in our minds love to betray us:
When I was at the Sphere with my family over Spring Break, I wouldn’t ride the long, exposed escalators. I took the elevator where I found the rest of the scaredy-cats.
If there’s anything good about having a phobia, it’s empathy for the range of what can go on in people’s minds and bodies.
I’m watching this poor guy thinking, don’t do it man, it’s not worth and all he wants is a glimpse:
1:44 PM · Sep 12, 2026 · 36.9M Views
2.99K Replies · 5.3K Reposts · 131K Likes
The comment section understands, and based on the number of “likes”, many others do too.
Anyway, I blame my kids for my embarrassment when I go to the Sphere to see Metallica with a group of guys next month and have to explain that I’ll meet them at the seats.
Money Angle
A couple of Option Trench episodes to share:
📺Terminal vs Path-Dependent Value Explained Using Collars | 39 min
📺The (Not So) Efficient Market Hypothesis? | 59 min
The first one will be useful for anyone wanting to learn more about option collars, which I’ve been writing a lot about. A video might be a gentler format so check that out.
The second one applies to investing broadly. I also use the Paradox of Provable Alpha at the end to answer a good question Erik asks.
Money Angle For Masochists
Alex is an options trader you should follow in case he ever tweets a lot. Because he doesn’t, when he posted the question below a year ago, it got few responses. I took the liberty of posting it myself this week.
This was fun because it led to a lot of discussion on the timeline and DMs. I was told it sparked a bunch of quant debate on one trader’s desk.
The most popular answer, which was still less than 1/3 of the responses, was the correct answer.
Why?
The maximum value of a put is the strike. The maximum value of a call is the stock price.
Straddle is C + P so $100+$100 = $200
Notice how this means all call spreads go to zero since the calls are worth the same — the stock price. All put spreads go to their max value— the distance between strikes because the puts themselves are worth the strikes.
Logic for delta:
Delta is the change in option price per change in stock.
But the put’s strike is fixed, so the value of the put doesn’t depend on the stock price. The put has zero delta. It’s always worth $100. Which means it has no gamma either 🙂
The call is $100 because the max value of the call is the stock price. The call value moves 1-to-1 with the stock, so it has a delta of 1 or 100%
The max value of a straddle is therefore the stock price plus the strike price.
If you sell the straddle or either option at max value and hedge on its delta one time (this is known as a static hedge in contrast to dynamic hedging where you would rebalance as your hedge ratio changes), you cannot lose. It is that simple fact of arbitrage that makes it the upper bound.
To address the second most popular response in the poll, those who said the straddle is $100 (wrong) and has a 1.00 delta (correct), we will demonstrate why this is incorrect.
What’s your p/l if you sell 1 straddle at $100 and buy 100 shares against, if the stock goes to $300?
The straddle will be worth $400, so you lose $300 but make $200 on your long share.
Hmm, maybe I’m just underhedged. Fine, what if I hedge on a 200 delta?
In that case, you actually make money; you win $400 on your 2 shares more than offsetting the $300 straddle loss. But what if the stock went to zero?
Your straddle p/l is unchanged, but you lost $200 on the long stock position. Arbitrage max value means you cannot lose if you sell at that price. Since we found a losing scenario, the price is not the maximum arbitrage bound. If you sell the straddle at $200 and buy a single share of stock, there’s no scenario where you lose. It is the lowest straddle value for which this no-lose scenario is true, thus it’s the arbitrage bound.
Of course, this is but a toy problem where the call and put go to their maximum values because it’s a degenerate case of infinite time or vol. But learning how a function (an option price is just a function) behaves by observing its boundaries is good for intuition. You did this in 9th grade. Khan Academy can jog your memory:
In the real world, you can fleetingly find options that trade beyond their arbitrage values:
Earlier in the week, @DeepDishEnjoyer aka p4 wrote a thread about a dividend mispricing.
It led to some back and forth with passersbys who use options but appear to have large gaps in the fundamentals.
Between the maximum value poll and p4’s dividend lesson, it’s worth saying it:
In a proper option education, you spend a lot of time on arbitrage relationships, cost of carry, and synthetics before you ever hear the word “volatility”.
I didn’t study formal math but I imagine there’s a lot in common with the process of proofs. Arbitrages rest heavily on assumptions. So to understand the relationships, you are forced into an intimate familiarity with the assumptions. And in the extremes of everything, it’s the failure to examine assumptions that leads to being blindsided. But also, when things get extreme, to go on the attack means asking yourself, “Who’s on autopilot? Is this price resting on a stale assumption?” The arbitrage relationships give you the highest conceptual ROI that derivatives offer, you never learn the most useful thing derivatives can teach…passage over the “bridge of asses”.
If you want to see more examples of why option basics are so key to understanding assumptions and opportunities when things get weird:
From My Actual Life
I leave you with another pic from our family chat where my wife posted a photo of where she was walking.
I don’t know how many Egyptian Arabic speakers we got in the crowd but “shib-shib” is like a slipper. Mom’s weapon of choice. Apparently this is a broader thing:
Stay groovy
☮️
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