Soundhound AI Stock

Top Level Investment
25 Mar 202406:27

TLDRThe video discusses a lossless options strategy for volatile stocks, using a company with AI connections as a case study. It highlights the stock's significant price movement after an investment from NVIDIA, and the high volatility skew towards put options. The speaker emphasizes the importance of understanding historical and implied volatility, options volume, and strategic position management over predicting stock movements. A poll is mentioned regarding the stock's future direction, and the speaker introduces a new experiment of building a portfolio from scratch with investments from YouTube earnings.

Takeaways

  • 📈 The speaker presents a lossless strategy for trading on sound stocks, emphasizing the importance of options trading for profiting without significant risk.
  • 💡 The stock in question, related to artificial intelligence, has been unprofitable and volatile, with a significant increase and subsequent correction after an investment by NVIDIA.
  • 📊 The options market indicates high volatility around 140%, with a volatility smile skewed towards the downside, suggesting market anticipation of a potential decrease in the stock's value.
  • 🔄 The speaker advises considering both buying and selling options due to the high volatility and the potential for profit from the increase in volatility itself.
  • ⏳ Historical volatility is currently higher than implied volatility, indicating that volatility may increase and return to historical levels.
  • 📝 The importance of options volume is highlighted, with large volumes at specific strike prices indicating potential resistance levels for the stock.
  • 🚀 The speaker's strategy involves a complex position with both call and put options, and emphasizes the need for careful management and calculation to hedge potential losses.
  • 📈 The potential for significant profit exists if the stock price moves sharply up or down, but the speaker warns against replicating the strategy without understanding the risks and complexities involved.
  • 📊 The speaker's philosophy focuses on smart position and risk management, stating that the real profit lies in the risk-to-reward ratio rather than predicting price movements.
  • 🌐 The speaker mentions a poll on their channel about the stock's future performance and plans to start a new experiment with a clean account, gradually building a portfolio from zero.

Q & A

  • What is the main focus of the strategy discussed in the transcript?

    -The main focus of the strategy is on options trading for sound stocks, particularly focusing on profiting from volatility rather than just the stock price movement.

  • What was the significant event for the AI-related stock mentioned?

    -The significant event was the investment by NVIDIA, which led to a nearly 500% increase in the stock price.

  • How has the AI stock performed after its IPO and the investment news?

    -After the initial surge, the stock has fallen by 44%, indicating a correction.

  • What does the options market indicate about the stock's volatility?

    -The options market indicates very high volatility around 140%, with a skew towards the downside, suggesting that investors are anticipating a potential decrease in the stock price.

  • How does the historical volatility compare to the implied volatility according to the transcript?

    -The historical volatility is currently much higher than the implied volatility, suggesting that volatility may increase and return to its historical levels.

  • What is the significance of the options volume at specific strike prices?

    -The large volume at specific strike prices, like $10 for both call and put options, indicates a high concentration of trades and can provide insights into potential price barriers for the stock.

  • What is the 3D volatility mentioned in the transcript?

    -3D volatility is a visualization tool that provides a detailed view of how volatility changes across different strike prices and expiration dates, which can be useful for strategy development.

  • What is the speaker's philosophy regarding stock trading and position management?

    -The speaker emphasizes smart position management and risk management over predicting price movements. They believe that understanding risk-to-reward ratios and managing positions properly is more important than trying to predict where the stock will go.

  • How does the speaker plan to demonstrate portfolio formation from scratch?

    -The speaker plans to create a new account with zero dollars and gradually invest and buy stocks, starting from absolute zero. They intend to share every step, including the stocks bought and performance against the S&P 500.

  • What are the two key price levels to watch for the AI stock according to the speaker?

    -The two key price levels to watch are $5 and $10, which the speaker believes may indicate a range of consolidation for the stock.

  • What is the purpose of the poll the speaker created on their channel?

    -The purpose of the poll is to gauge viewers' opinions on where they think the stock will go in the next month, and to review the results to see who was correct.

Outlines

00:00

📈 Stock Trading Strategy and Volatility Analysis

The paragraph discusses a nearly lossless options trading strategy on sound stocks, emphasizing the importance of understanding volatility and the options chain. It mentions a specific stock related to artificial intelligence that has experienced significant price fluctuations due to news of investment from NVIDIA. The speaker delves into the options market, highlighting high volatility and the skewed volatility smile towards the downside. The analysis includes a look at historical and implied volatility, suggesting that volatility may increase. The speaker advises on the strategic buying and selling of options based on this analysis and discusses the importance of options volume and price levels in predicting stock movement. A complex strategy involving buying options, selling hedges, and the underlying asset is briefly outlined, with a warning about the risks of replication due to the complexity of position management.

05:00

📊 Long-Term Investing vs. Day Trading and Portfolio Building

This paragraph shifts focus from the technical analysis to the broader context of investing. It differentiates between long-term investing, where the entry price is less critical, and day trading, where price movements are more important. The speaker also introduces a new idea of starting a 'clean account' with zero dollars, aiming to build a portfolio from scratch and document the process on the YouTube channel. This includes the intention to reinvest earnings from the channel into the account, with detailed tracking of stock purchases and performance against the S&P 500 index. The paragraph concludes with a reminder to watch the video for further insights on the discussed stock and an invitation to participate in a new experiment by subscribing to the channel.

Mindmap

Keywords

💡Sound Stocks

The term 'sound stocks' refers to stocks that are considered to be stable and reliable investments. In the context of the video, the speaker is discussing a strategy for trading these types of stocks, emphasizing the importance of careful analysis and risk management.

💡Volatility

Volatility is a measure of the variation in the price of a trading instrument, such as a stock. High volatility indicates large price swings, while low volatility suggests a more stable price. In the video, the speaker delves into the concept of volatility, particularly how it can be used to predict market movements and to develop trading strategies.

💡Options Chain

An options chain is a list of all available options contracts for a particular security, categorized by strike price and expiration date. It is a crucial tool for options traders, as it allows them to analyze the market's sentiment and to choose the right options for their strategies.

💡3D Volatility

3D Volatility is a visualization tool that represents the implied volatility across different strike prices and expiration dates, giving traders a more comprehensive view of market expectations. It helps traders to understand the market's perception of potential price movements and to make informed decisions.

💡Profit

Profit in the context of trading refers to the positive difference between the amount invested in a security and the amount received from its sale. The speaker is focused on strategies that can generate profit while minimizing the risk of loss, which is a central theme of the video.

💡Position Management

Position management refers to the process of adjusting and maintaining a trading position to optimize returns and manage risk. This involves decisions such as when to buy or sell, how much to invest, and what strategies to employ to protect against potential losses.

💡Risk Management

Risk management is the practice of identifying, assessing, and prioritizing potential risks to minimize, monitor, and control the impact of those risks on an investment's objectives. In trading, this involves strategies to protect against financial loss and to ensure that potential gains outweigh potential losses.

💡Historical Volatility

Historical volatility is a measure of the past price fluctuations of a security, calculated based on past prices over a certain period. It is used as a benchmark to compare with current implied volatility and to predict future price movements.

💡Implied Volatility

Implied volatility is a forward-looking estimate of a security's volatility, derived from the market price of an option. It reflects the market's expectation of the stock's volatility over the life of the option and is a key component in option pricing models.

💡Options Volume

Options volume refers to the number of options contracts traded during a specified period. High volume can indicate significant interest in a particular stock or market movement, and it can also influence the liquidity and price of the options.

💡Stock Price Movements

Stock price movements refer to the changes in the market value of a company's shares over time. These movements are influenced by various factors, including company performance, market sentiment, and broader economic conditions.

Highlights

A practically lossless strategy on sound stocks is presented, dissected in great detail.

Volatility and the options chain are key components of the discussed strategy.

3D volatility is demonstrated as a tool for understanding market dynamics.

The stock in question, related to artificial intelligence, has had a volatile history with significant price swings.

High volatility of around 140% is noted in the options market, suggesting potential for options trading opportunities.

The volatility smile indicates a skew towards the downside, especially at lower strike prices.

Investors are buying call options as a hedge against potential stock decreases.

Historical volatility is higher than implied volatility, suggesting a return to historical levels and potential increase in volatility.

The strategy involves not just capitalizing on stock price movement, but also on volatility increases.

Large options volume concentrated at specific strike prices can indicate potential price barriers.

The stock's price movement is influenced by the options market, with significant walls of options potentially halting price breakthroughs.

3D volatility analysis provides a detailed perspective on potential market outcomes.

The presenter's strategy includes complex position management and hedging techniques.

The importance of risk management and position management over predicting stock price movements is emphasized.

A poll is created on the channel to gauge audience predictions on the stock's future performance.

A new experiment of starting a clean account with zero dollars and building a portfolio from scratch is proposed.

The potential for consolidation of the stock price within a $5 to $10 range is discussed.