How many vol clicks to buy a car?
Vol #222: April 10th, 2025
I was almost forty years old before I owned my own car.
Sure I had “Black Bear”, but that was shared with my future wife for trips to upstate New York. (Financial Advice: Don’t buy a used BMW.) There were also the crossover SUVs that wheeled us to or around Chicago, but I spent more time on my fixie and the Blue Line. Until I could pick out a transmission and litter my trunk with ratchet straps and out-of-season sports equipment, the vehicle wasn’t truly my own.
As someone who enjoys a competitive drive, but isn’t a car guy, driving a Volkswagen GTI gets more attention than I expected. Last week at the lumber yard a mom tapped my window. She recounted the story of how her 21 year old son flipped his own after a weekend of Track Tapas at Lime Rock Park. Fortunately he walked away nearly unscathed.
More often it’s a look of respect from the tire guy when he asks if the car is a manual. Or the nod of appreciation from the older fellow at the park after he wonders what year it is.
I’m still watching YouTube to learn how to double clutch, and after bluffing in the barbershop I had to verify exactly how many horsepower it was. Yet I can tell you how much ETH I sold to buy it. Even the gwei of the gas fees.
A side effect of a financialized memory is that you don’t always remember the most important information, you just remember the cost. The best traders I know will remember the price of a rev/con they traded 4 years ago. But if you bought stock in your 401(k) this week, don’t worry whether you got SPY at $503 or $512. Just like at dinner, citing the vintage and vineyard of wine is less important than who was there and what else you talked about.
Most of my relative value trade has been spent in the red. (At these price levels it’s a winner, but the reasons why aren’t that great.) In the early days I enjoyed new wheels and a rebalancing win. But soon there were various price surges where the car rang 911 expensive in the mental accounting department.
Thinking I’d be driving a Porsche if I shoulda coulda woulda top ticked the Ethereum market is toxic. It’s exhausting to price everything in those terms. Money is for spending and a house doesn’t cost 2800 shares of Microsoft.
At no point does this relative value thinking ring louder than during extreme price moves. To the upside during buoyant surges, or the downside with the same bittersweetness of a hedge paying off.
In a pure barter, you have a direct exchange of good for good that makes the comparison easy. Programmable internet money for a combustion engine. Currency tends to obfuscate this, but in reality you’re always pulling from some pocket, and feel the cost that way.
To simplify the financial landscape, I divide the world into two camps - trades and investments. Particularly with options based strategies, the methods to capture either opportunity are distinct. You don’t trade an investment, and you don’t invest in a trade.
A car is definitely not an investment, but my “trade” here fits squarely into the personal finance, asset allocation camp. Whether the Uniswap print was at $1856 or $1921 or $2017 matters less and less over time.
I’m not rejecting the absolute fact that selling all at the local top would have paid for heated seats, but focusing on the larger and more important decision that investment portfolios need to be rebalanced and that’s a good thing.
Any trader looks at the above price differences and sees chasms of missed opportunity. I do too, particularly having staked in the LP pool for ETH/USDC and felt the negative gamma of “impermanent loss”. A trader’s horizon is shorter and more targeted.
A trader cares about the decimal points of price because they are more leveraged. Likely in a capital sense, but also because trading is participating in the business of the market, not just using it. A direct externality of the trading process is eliminating the inefficiencies and implementing the weighing machine process of markets. Investors on the other hand, participate for what the market reflects, not how it arrives there.
When prices diverge in their process of seeking fair value, a trade is an opportunity to buy low or sell high. The opportunity doesn’t persist because trading eats inefficiencies and creates liquidity. Whether you’re a liquidity provider or a customer, participating as a trader means looking at all the relative values and finding the prices that are likely to stick, and those that are likely to move. Investors seek value at a different horizon, whether that’s equity risk premium or more nuanced portfolio management.
Both participants need each other. The investors lean on traders to create a liquid and efficient market that is a fair representation of value. Traders rely on this investment flow to create kinks and mispricings. Natural, customer, buy side flow is the marginal order that pays a bid-ask spread and creates a dent in the theoretical surface - an opportunity to be machined smooth by the trading engines.
The philosophical difference between these is also expressed in the time line of the position. In the options markets, at the shortest end are the dealers and other active liquidity providing participants. Longs and shorts go sour over time because the volatility or the interest rate was mispriced, and a well balanced risk book positions itself so those wins and losses net out over time. But the important PnL mark is at the end of the day. These traders want prices to stay stable on the shortest of horizons.
How much did you day trade for?
There are plenty of 0DTE retail traders that also want the same thing, but most positions less than thirty days out also show the same stripes. Short term trading opportunities will target expensive or cheap prices that have a neatly defined window to realize.
When markets are choppy, value is moving rapidly, and both investors and traders start looking at opportunities. I’d say these markets are once in a generation, but I’ve already traded through 2008 and 2020, and still have years in me.
Buying just before the surge or selling just ahead of the dump has the potential to notch up big wins for traders. Investors with cash can profit from panic dislocations, but generational buying opportunities come with a lot of risk. Even if it all lines up, sometimes your spidey sense says “No Mas Puts”.
No matter the strategy, there’s a lot more potential opportunity on the table these days. But that means that the risks of capturing it are higher than ever.
When the ball is moving fast, you don’t want to be blindly chasing it. For a trading opportunities it’s important to find a clear lens and make unemotional decisions. Pay close attention to the prices, and make sure you have a clear plan. Get out when you can.
Investment decisions should also be made with both feet firmly planted - dialing up leverage to buy the dip is a mugs game, and so are panic reallocations. But if you do get in there, don’t sweat the price too much. Your horizon is many miles down the road, and today’s mark out shouldn’t be the focus.