Micro-Short

Mr Softy gets a short visit

Shorting isn’t a great strategy, generally speaking.

Shorting a great company is a terrible strategy, definitely speaking.

Shorting the world’s greatest company …. well, that’s pretty stupid.

But Friday night (Europoor hour), as I’m having dinner and getting ready to unwind for the weekend, the news flashed on my phone that Sam Altman was ousted from OpenAi. Now I think of Sam Altman as that other guy in Silicon Valley who looks like Data from Star Trek (I don’t need to tell you who the first one is!). But it doesn’t matter how I view him; what’s important is that Wall Street views him as the visionary who represents the new age of AI (even if his creation obliterates humanity by the end of it, who cares, Wall Street gonna get paid!).

Since ChatGPT was launched in November, and since Microsoft’s investment of another $10bn in OpenAi in January, the Microsoft share price has risen by >50% and added more than $1 trillion of value.

One can debate who was more impactful for this “value creation” in Mr Softy during that period: was it Sam Altman aka Data 2 or was it Yellen aka the Sith Lord of Finance?

Probably both, but the importance is that Sam definitely played a role. So Sam leaving was kind of a big deal.

Back to Friday night, Europoor time, 10 minutes before the close: Here I am trying to relax, the headline comes up, I check the Mr Softy chart, completely extended, UP 13% in 2 weeks, at the all-time high, at a $2.7 trillion market cap and my instinct tells me to buy puts. And then my conscience kicks in: “Shrubby, don’t be stupid, it’s Friday night and you don’t know half the story on this. But I hear you, it’s a good risk-reward. You have my blessing to buy a small put position. And don’t forget you are short the Nasdaq anyway. Mr Softy is already a big part of the Nasdaq, keep it small so you get that fomo out …”

Well, shooters shoot. I bought a small put before the close.

Was it smart? I don’t know.

Was it a good risk-reward at that time? Definitely. A $2.7 trillion company that added a $1 trillion of value in a year due to AI (or Janet!), up +13% in a couple of weeks, at all-time highs and now there’s a hint of risk in the thesis???

Now I fully expect Microsoft to remain a great company. So this Micro-Short trade will be a very short-lived trade in my book.

I felt I had to write this piece so that I explain my reasoning. Or maybe this is just my way of seeking redemption for doing something as stupid as buying puts on the world’s greatest company.

Disclaimer: Nothing here is Investment Advice. This is the trading blog of a Shrub Operator. I could be a 12-year old trading from my parents’ basement for all you know, don’t be stupid