• Options traders think it's extremely unlikely that the stock market will appreciate more than 30 or 40 percent over the next two to three years, as it did over the last year. So they will sell you the option to buy current indexes for 30 or 40% above their currently traded value for very cheap.
  • But slow takeoff, or expectations of one, would almost certainly cause the stock market to rise dramatically. Like many people here, I think institutional market makers are basically not pricing this in, and gravely underestimating volatility as a result, especially for large indexes like VTI which have never moved more than 50% in a single year.
  • To take advantage of this, instead of buying individual tech stocks, I allocate a sizable chunk of my portfolio to buying LEAPS (Long-term Equity AnticiPation Securities) on the broader stock market. If a slow takeoff does happen, and public companies capture some of the increased productivity, I'll at least be duly compensated for it when my skills become worthless. If it doesn't happen, this part of my portfolio will vanish, but that seems like an acceptable risk given the upside.

I started doing this in January, and so far the mark price of the basket of options I've bought has doubled.[1]


The options contracts you're talking about expire in "two to three years". Does this strategy only make sense if you think visible slow takeoff will begin before 2027?

That's not quite necessary. If large parts of the economy get automated "only" in 2030, near-term AGI progress could start to impress market makers enough that they "wake up" and increase the price of these securities and options in anticipation of a boom. Which is why I choose to buy now instead of closer to my expected timelines, while Nvidia is only a two trillion dollar company and my alpha on this could run out any given year.

But I think takeoff before 2027 is possible. As a layman, the simplest argument for shorter timelines I can empathize with is that GPT-3 was released in 2020, GPT-4 was released in 2023, and prediction markets expect GPT-5 to release later this year. That plus the enormous amount of capital investment in AI makes me think that there's a possibility of large portions of software engineering getting automated soon, which would precede further speedups.

Why not buy futures instead of options, if your thesis is about the next ten years rather than the next three?

Futures involve lots of leveraged downside risk. If the timing is wrong, I could lose a lot more money with futures than I can with options. On the other hand, if I'm right and GDP starts speeding up dramatically, then the deep OTM call options will be more valuable than futures contracts. 

The only benefit to futures is that I would get more than zero percent of my investment in the "sane" scenarios where Nasdaq and the S&P 500 rise gradually but not the stratospheric amounts I expect. That probably only happens if AGI isn't here, in which case I'm agnostic about the performance of these indices and don't really have a thesis either way.

What is money going to be worth to you post-AGI anyways?

Possibly a lot. 

First, I expect there to be large returns before any kind of catastrophe happens. Some of those returns could be directed toward either alignment research or high-leverage political opportunities, maybe to greater effect than the opportunities I have now. 

But also, from my vantage point I think there's a strong chance that:

  • RLHF (and trivial improvements on RLHF such as DPO), along with some workshopping, turns out to be broadly sufficient for AI alignment. 
  • Existing property rights get respected by the successor species. 
  • There is no significant wealth redistribution, and the vast majority of the lightcone will go to people with absurdly disproportionate political or economic control of the substrate that houses intelligence. 

I doubt that all three of these things will be true. But in this scenario, the share of global wealth I control later, which I can use to purchase galaxies, do acausal trade, and keep myself and other unmoneyed people alive, is worth comically more to me than the share of global wealth I control now, which I can only spend on cocaine and hookers. So I'm prepared to optimize for it.

  1. ^

    To be clear these are extremely volatile contracts, and some of their success has been fortuitous timing unrelated to AI, like the fed's recent announcements. 

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A few things should be made clear.

  1. Buying in January was almost the best case scenario, it is not a good metric to generalize from.
  2. This is not remotely as safe an investment as buying tech stocks. It is much more all or nothing. Especially people new to this should understand they should not spend more then they are willing to have completely vanish even if they are correct in direction, and stock go up, just they don't go up enough fast enough.
  3. Options can be complicated, and you can losing substantially more than just the initial purchase price if you don't know what you are doing, or even if you do but are not actively managing your portfolio. One scenario is the options are in the money and you hold through execution. In the period between the execution and when you are first able to sell at open, the stock can drop in value below the execution price.

There are SPX options that expire in 2027, 2028, and 2029, those seem more attractive to me than 2-3-y-dated VTI options, especially given that they have strike prices that are much further out of the money.

Would you mind posting the specific contracts you bought?


QQQ 640 (3y), SPY 750 (3y), VTI 340 (2y), SMH 290 (2y). Those were the latest expiration dates I could get.

Those SPX options look nice too, though I wish I could pay for a derivative that only paid out if the market jumped 100% in a single year, rather than say 15% per year throughout the rest of the 2020s.

Does buying shorter-term OTM derivatives each year not work here?

I think institutional market makers are basically not pricing [slow takeoff, or the expectation of one] in

why do you think they're not pricing this in?

  • The market makers don't seem to be talking about it at all, and conversations I have with e.g. commodities traders says the topic doesn't come up at work. Nowadays they talk about AI, but in terms of its near-term effects on automation, not to figure out if it will respect their property rights or something.

  • Large public AI companies like NVDA, which I would expect to be priced mostly based on long-run projections of AI usage, have been consistently bid up after earnings, as if the stock market is constantly readjusting their expectations of AGI takeoff by the amount that NVDA is personally earning each quarter rather than using those earnings to inform technical timelines. I think it's more likely that they're saying something close to "look! Nvidia's revenues are rising!" and "wow, Nvidia has grown pretty consistently, we should increase the premium on their call options" and not really much beyond that.

  • Current NASDAQ futures prices are business as usual. There are only two ways to account for this prices if they are pricing things in; either they thing slow takeoff is extraordinarily (<1%) unlikely to occur before 2030, or extremely unlikely to lead to lots of growth, or both. Either of these seem like strange conclusions to me that would require unusually strong understanding of the tech tree and policy response, but as I mentioned, they're not even talking about it so how would they know?

  • "Pricing this in" would require entire nation-states worth of capital. Even if there's one ten billion dollar hedge fund out there that is considering these issues deeply, it wouldn't have the power to move markets to where I think they ought to be.

  • AGI takeoff is completely out of distribution for the Great Financial Machine Learning System, being an event which has never happened before, that would break more invariants about how economies work and grow than any black swan event since the dawn of public stock exchanges. There's no strong reason to believe, a priori, that hedge funds are selected to account for it in the same way they are selected to correctly predict fed rate adjustments, besides basic reasons like "hedge funds are filled with high IQ people". A similar, weaker reason explains why it was a good idea to buy put options on the market in February 2020.


Note: there was previously an awful typo here; the third bullet said "buying individual tech stocks" instead of "instead of buying individual tech stocks". The reason I'm posting about this is because it seems higher expected value than buying and holding e.g. NVDA or call options on NVDA. I wish I had caught this typo sooner as the previous post didn't make any sense.

  • Existing property rights get respected by the successor species. 

What makes you believe this?

if you don't believe this will happen not much matters in financial markets. i am unsure what your investment strategy should look like if you don't believe this. or said another way, it's a bit of a pascals investment. either you believe this and win or you don't believe this and lose out regardless of positive or negative outcome.

Have you considered using OTM call ratio backspreads? One could put them on for a credit so they make money instead of losing it if your timing is off or if the market crashes. There is still a dip around the long strike where one could lose money, but not when volatility increases (and you close/roll before expiry) nor if the market blows past it.

(Disclaimer: I'm not a financial advisor for any of you. I don't know your financial situation. I'm not necessarily endorsing the thesis, and this is not financial advice.)

You said you've been buying calls on the general stock market. Instead, why not buy calls on 20-30 tech companies that'll likely benefit from slow takeoff? 

This is very speculative, but if Anthropic/OpenAI/Google/Meta do achieve TAI and we head towards a slow takeoff, geopoltical risk from China may be a concern.  To the best of my knowledge China is a few years behind us on AI, and doesn't have the compute capability to catch up. I doubt China will just sit back and let the US achieve such a strategic advantage, and may invade Taiwan to cut out our supply of GPUs.


I do have call options on ETFs like QQQ, which are very tech-heavy, as well as SMH, which are baskets of semiconductor companies. But buying calls on individual tech stock options incurs a larger premium, because market makers see stocks as much more volatile than indices. So they're willing to sell you options on e.g. VTI for much less, because it's the entire stock market and that's never appreciated more than like 50% in a single year or something. My thesis is that market makers are making a mistake, here, and so it's higher expected value to buy call options on indices rather than companies with an AI component.

I will add this to the FAQ because I think the article doesn't make it clear.

Implied volatility of long-dated, far-OTM calls is similar between AI-exposed indices (e.g. SMH) and individual stocks like TSM or MSFT (though not NVDA). 

The more concentrated exposure you get from AI companies or AI-exposed indices compared to VTI is likely worth it, unless you expect that short-timelines slow AI takeoff will involve significant acceleration of the broader economy (not just tech giants), which I think is not highly plausible.

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I also started doing something similar. I’ve thought about rolling over every 6 months in case a black swan flash crashes the value of the options at the time of exercising/selling. Any thoughts on this?

If bid-ask spreads are large, consider doing so less often + holding calls that expire at different times so that every time you roll you're only rolling half of your calls.