The Most Convex Trade of My Career

Oh no, not another energy note...

Back from a few days off and found myself wondering “what the heck did you all do to these markets while I was away??” Once again, I planned to write a comprehensive note, but the oil section here got long, so I have decided to write all my thinking in two installments and hopefully get the second note out soon on broader risk assets, positioning, and most importantly funding (very important, we need to come back to this). I know many readers may be frustrated with all the oil notes and discussion on chat (and it’s telling that I am seeing a large number of subscribers drift away), but there is a reason for this: oil and related trades have turned into the most convex opportunity I have seen in my 25yr+ career, and as someone who’s had a few wild runs, I would like to think that is saying something. With that in mind, can you blame me for not really caring what is going on in semis or Korea or AI or SpaceX?

It’s hard to know where to start, but let me lay out a few things I believe: