Chug chug trade
Vol #263
Bam! Pow! Glou glou.
Onemonepia is fun. When words look like they sound, they also beg to be used.
If the first example brings back memories of Adam West in grey spandex, time to pour you a glass of something easy. French for “chug chug,” glou glou refers to wines that are approachable and light in the glass.
Serious collectors fill their cellars with Burgundy and Bordeaux. They cling to their 2010s because they know a summer with blazing hot days and cool nights happens once in a generation - wines that deliver high concentration and ringing acidity are an absolute glitch in the matrix.
At least in France, the kids born after that vintage are already sitting in cafés emptying carafes. Likely it’s something much less stuffy. A spicy Languedoc or tart little Borgeuil. Wines that beg to be drunk, long before they’re worth displaying.
Lower in alcohol, fruitier; these wines do well with a little bit of chill on them, and fit in perfectly with your summer barbeque or take out pizza. Alliteration is just as fun of a rhetorical device, but the Anglicized “porch pounder” doesn’t capture the full essence of how meaningful this wine style is.
While they don’t command the prices of Domaine de la Romanee Conti, the soul of glou glou is just as traditional. Vino from Australia or Etna can also merit this badge, but the heartland of the style is in Beaujolais. A prototypical technique here is carbonic maceration. That’s a fancy way of saying - throw whole bunches of grapes in a sealed vat and let them do the rest.
Oenologists will pull out temperature gauges to track the fermentation, or pH meters to determine whether tartaric acid or chaptalization is needed. The chef in the kitchen licks the spoon and says, a little sugar? A little lemon juice? Here we let the fruit do the work.
This is how our ancestors made wine. Juice that tastes good, and doesn’t demand its own decanting cradle. You can find me happily tucked in at a white table cloth in the Prince of Luxembourg’s gastronomic palace, but most of the time you just want something to cheers with.
Glou glou has far more use cases than Grand Cru.
Exotic is interesting. It tickles our fancy but empties our wallets. There is a time and place for the 1%, but it needs 99 other examples to remain exclusive.
The same function tracks experiences and investment returns. There are a handful of examples that everyone remembers, but there are 252 trading days in a year. Whether you’re trying to craft the perfect black swan hedge or swing for a home run every pitch, most of the time it’s just every day.
Trading for opportunity is bottle hunting. It’s a constant, full time job to find an edge or a mispricing. They’re short lived, and turn to vinegar if they spend too much time in the open.
Everyone remembers the time Soros broke the Bank of England, or the grailed bottle of 1971 La Tâche. But the tapestry of returns comes from nameless summer nights with friends, and lazy market days when only a couple bps happen.
This is even more important to remember if you’re trading an options strategy. On the long side unexciting theta decay is the norm, and on the short side shit happens.
Other than 20+ inches of snow in the greater metropolitan area, this week has been normal. Of the 8200 trading days since January 1993, 4500 of them have moves of less than 60bps. 6100 have moves of less than 1%. 4 out of 18 days this month have seen changes of more than 1%, so even if we have another 100bps day, it’s still tracking the long term average.
Yet I’ve heard numerous people say “be careful out there”. Or “good luck in these choppy markets.” Did you think options selling was for income?
Appreciate options like you savor that 2000 Chateau Palmer. But trade options like you’re drinking glou glou.
Your investment horizon is a long, lazy dinner. Don’t douse it with leverage and a high alcohol punch. Glass after glass only happens when you’re not trying to squeeze out 16% ABV power. The more you try to extract, the thinner the razor gets.
The everyday wine is forgiving. It’s robust to the “big” moves that happen on the daily. It can spend an hour or two in the fridge, or sit out in the sun. We can’t predict the weather or the volatility regime, so stock up on something that works regardless.
This is the risk transfer use case. We know that stocks move around, just not when. If we did it wouldn’t be a risk, so don’t try to predict it, just be prepared. Buffer your equity, or lean into kurtosis, but in either case don’t be surprised.
Glou glou wines don’t need to be cellared, they’re meant to be drunk now. Have fun picking spots in your play account, but the unicorn bottle doesn’t come along very often. You can put away the decanter and exotic greek barometer, there’s no need for heroics here.
The purpose of an options strategy is to integrate with your portfolio, not become it. Hedges and accelerators are overlays, they’re not an independent key to risk free returns. If anything they come with a little bit of drag themselves - slippage, liquidity, and timing concerns - so be sure they pair well with the main course.
When I pull up to Friday lunch with a 2009 Gevrey Chambertin Les Cazetiers, that’s the centerpiece. It’s the dispersion trade, or exotic structure that consumes hours of time and is talked about for years to come.
But my personal portfolio is built on far more glou glou moments. Because I’m a cork dork I remember the missed trade of not serving Lapierre’s Raisins Gaulois at my wedding, but no one else does. Fortunately half a bottle is still sitting on my kitchen counter because last night was just a Thursday.
A great bottle can become the story. It’s why we read Market Wizards and count the $3.4B Stevie Cohen made last year. But when we look back on our own returns, there aren’t going to be too many epic stories. Trying to make that so is more often a path to ruin.
Glou glou will never earn a 100 point score, but that’s not the point. Hail marys are for the play account. Investors who are serious about options know they need something simple to serve every day.