Moontower #333

In this issue:

• Introducing slate

• I-bonds vs TIPs

• Staring at an option quote

Friends,

I’ve mentioned a few times that I’m experimenting with bringing education and practical investing topics to IG.

One of the experiments I plan to do Khan Academy-style short-form where I show my work on a “chalkboard” and speed it up for socials.

Our little 10-year-old artist has one of these USB Huion drawing tablets lying around.

I can use that to draw up the explainers, but on what software? I checked out some popular recs like Xournal+ and Openboard but found neither of them immediately delightful and just another thing I’d need to get used to. I told Muse I wasn’t pleased with those recs.

I call an audible. I had very low expectations of what I was about to try. I tell Muse:

You know I have this Huion pen tablet thing and you understand what I’m trying to do I have a crazy idea can you make me a prompt to give to Claude Code to ask it about the feasibility of it being able to make me my own very lightweight software tableau that can do what I want and is tuned for math and investing so make me a me a prompt and let’s see what happens

It gives me the following hand-off to Claude Code:

I made it small so it fits here easily and in case you really care to look but like people recounting what happened at each round of a poker hand, almost nobody cares. The point is simply that you should be in the habit of asking the AI to write prompts for you when the problem you are trying to solve is unoriginal.

The fact that there are many drawing apps means my issue is unoriginal. So let’s see if Claude Code, using Muse’s prompt, can one-shot a web-based drawing app.

Voila:

drawing_board.html

• To use it, just download the file, press Command + O (or Ctrl + O on Windows) in a web browser and choose it from the file explorer.

That tool was the absolute first shot.

Seeing how cool and responsive it was, it iterated on it several times, adding way more features, including the ability to add functions to the physical pens buttons.

It’s now a drawing tool made for math and investing concepts to be easily screenshotted or recorded formatted for IG stories, YouTube etc. This is truly personalized software.

I deployed it here: slate.moontowermeta.com, give it a shot!! It’s also dynamic for mobile.

Oh, one more thing. I told Muse to make a 3-minute video demonstrating the features and narrating everything it was doing. Pure one shot. Might be more insane than the app itself:

Money Angle

Lucky timing.

I nearly bottom-ticked the TIPs market with my trade last week. I explained in that article that my estimate for the trade’s 1-year expected return is about 8.50% with ~7.50% volatility. That suggests a weekly vol of ~1%

It’s already up 2% in one week or nearly 2 standard deviations. We’ll see if the yield holds as a high. The last time I bought TIPs, I also wrote about it in October 2023 and that high in yields held until just recently.

Anyway, a friend (and mentor!) who read my recent TIPs article reached out to say I should remind readers that I-bonds might be a better choice if their income is under certain thresholds because of the education tax exclusion. I-bonds, like TIPs, are state and local tax-exempt, but you can also avoid federal tax when used for qualified higher-education expenses.

There are income limits:

I bought them for all the members of my household back in November 2021, when they paid 7.12%. I wrote up the details in I-Bonds For You.

Five other differences worth knowing:

1. Price risk. I bonds have no market-price swings. TIPS can lose value if real yields rise, creating a loss if you sell before maturity.

2. Liquidity. I bonds are locked for one year. Redeem before five years and you sacrifice the latest three months’ interest. TIPS can be sold in the market before maturity.

3. Tax timing. I bonds let you defer federal tax until redemption or maturity. In a taxable account, TIPS generate annual taxes on both coupons and inflation adjustments even though you haven’t received the adjusted principal yet.

4. Purchase limits. I bonds generally cap you at $10,000 per person per calendar year. TIPS accommodate much larger investments.

5. How you get paid. I bonds adjust their interest rate and compound internally. TIPS coupon rates remain fixed, but the principal adjusts. They pay cash coupons every six months.

TIPs don’t have limits on how much you can buy, but the other major benefit is a yield you can lock in. I-bonds usually have a paltry fixed rate portion. Since you buy them directly from the Treasury at par, you are locking in a lower fixed return vs TIPs at current pricing. The higher TIPS yield can outweigh the I-bond’s friendlier features such as the potential tax exclusion and the lack of “phantom taxes”.

Money Angle For Masochists

Taking a small punt on gold upside before the end of the year. You can follow the thread here.

Kris

@KrisAbdelmessih

If GLD bottomed this am and you think the bank hacking narrative has legs it’s an interesting time to look at metals upside. The vols screen cheap cross-sectionally and have low percentile call skew (x axis is our "buy vol" algo score), y axis is skew percentile

@KrisAbdelmessih · 2026-10-23 · View on X

Point of sale: GC Dec 4260/4270 call spread

Even though I mentioned GLD, I actually executed in GC, the Comex futures gold options. GLD references gold in London vaults, and Comex delivery is in NY. But that difference has nothing to do with it.

Trading futures options has 1/3 the all-in cost (IBKR and exchange fees) of the equivalent risk in equity options. 250 GLD spreads = 25 GC spreads. The cost difference was about $100 instead of $300.

For educational purposes, I thought I’d share some observations from the point of sale. I targeted the 4260/4270 call spread. It’s a tight spread, similar to if you just wanted a binary bet on the futures expiring above 4265 or ~7% higher by late November.

I bid 1.40 for 25 spreads and didn’t get any contracts until the futures drifted lower to about 4006.70. That’s the first candle in this pic showing GC futures chart until the end of the day. I also superimposed the market in the call spread on the chart.

The market was 1.40 / 1.50 with Bid size (15), ask size (771)

I had been staring at the quote for a while before I even got a fill. After getting hit on 10 lots, I turned on a screen recorder for the next 2.5 hours (until 4pm ET, though the futures continue to trade for another hour)

Keep in mind this is a $10-wide spread with a .01 delta. $10 in gold is about 25 bps.

What follows is what’s running through my mind when I stare at the quote while watching the futures tick. I stepped away for long stretches and the other thing to keep in mind, based on what the recording revealed:

The quote never changed. Not a single market “event”. HFT people refer to any modification in a quote as a market event.

1. The offer never budged.

2. The bid was not joined.

3. Nothing traded.

4. The offer size stayed constant. No additions or subtractions.

My thoughts:

• Taking a partial fill of only 10 out of 25 is bizarre. I’d think the only counterparty to this is a market-maker. Who wakes up looking to trade a 25 bps wide vertical naturally? So I expect when I get hit it’s a market-maker, but then they only sell 10 out of the 25? What is this, a market-maker for ants?! And then when a partial trades, how does the rest of the bid not get swept by the chipper algo which surely knows this is a resting non-market maker starting to get hit.

• The futures dipped a few dollars below where I was filled. If the first seller liked selling at the higher futures price, don’t they like selling the spread even more now? I know the spread is only .01 delta, but… actually, let’s get into that for a moment.

• In the recording window, the futures rallied to 4015, or about $9 higher than when I got a partial fill. At .01 delta, $10 is 10 cents, which is one full tick in this spread, the gap between 1.40 and 1.50. Paying 1.50 with futures at 4015 is the same price as paying 1.40 with futures at 4005. The market wouldn’t fill me at 1.40 at 4005, but offered an equivalent price at 4015. Furthermore, my bid wasn’t joined with more size and the offer didn’t pull.

Anyway, if you untangle the chain of reasoning here, it can help you think more about how options get quoted. When option deltas are low, there are minimum increment problems in edge capture. For example, if an option has .01 delta, you could sell it with the futures at any price over a $10 range and you’d be booking something between a penny and a tenth of a penny of edge but at the tenth-of-a-penny price it’s obviously worse (you’re 10x less profitable if you extrapolate across your business), but you also can’t turn the market over and be bid there for a negative a tenth a penny of edge.

If you flip this logic to the customer side, if you keep track of all the market “events” you can likely deduce when a market on a low delta option will tick to the next price level. If you can buy a call synchronously with the last tick in the future before the market turned, that would be the best possible fill.

If you are a beginner, just understanding that buying a call for X vs 4015 in the futures is a better buy than buying it for X against 4006 in the futures is a step toward understanding the concept of volatility (the second buy is a worse IV than the first by:

change in underlying * delta / vega

From My Actual Life

Another cool AI capability.

A friend recorded this game with a tripod camera and sent me the video.

I gave it to Claude with instructions to extract rebounding/steal/scoring highlights for #17 on blue.

Not bad!

(Except it used a lot of my max plan tokens 🤑)

I’ve been a longtime fan of Nelly and finally got to see him perform. Last weekend we went to his show at the beautiful Mountain Winery in Saratoga (our first time there!)

Earlier this year I mentioned how I binged Nelly & Ashanti: We Belong Together in 2 nights. I’m openly jealous of how good he looks at age 51.

My favorite Nelly songs come from his earlier years.

E.I., Batter Up, and of course this banger I used to watch countless choreography videos of.

Stay groovy

☮️

Moontower Weekly Recap

• like morning sex on doomsday

• the “rewind” tail hedge