Ideas
Buy index puts as cheap hedge
Steve argues it is a good time to revisit downside volatility hedging because the chance of higher volatility has risen while the cost of hedging has fallen. Central banks are constrained by inflation, asset prices are stretched, and market risk-taking is complacent; for most retail investors he prefers Nasdaq or S&P put options over VIX derivatives because traditional puts have more duration.
Avoid VIX ETFs for most retail
He says VIX is a neat but short-term way to express volatility; it can spike quickly but tends not to stay elevated, so trading it requires agility and sophistication that most retail investors lack. He therefore does not like VIX ETFs or VIX derivative products as investments or hedges.
US equities face 2000-style downside
Steve sees a 2000-style tech-led collapse as more likely than another 2008 systemic banking crisis. NASDAQ and tech stocks have had extraordinary gains with stretched valuations and fragile revenues, and the S&P trades at an abnormally high 25x earnings with an earnings yield below cash; he says NASDAQ could fall 50% and still not look like compelling value, and the S&P has a long way down before it looks cheap.
US equities face 2000-style downside
Steve sees a 2000-style tech-led collapse as more likely than another 2008 systemic banking crisis. NASDAQ and tech stocks have had extraordinary gains with stretched valuations and fragile revenues, and the S&P trades at an abnormally high 25x earnings with an earnings yield below cash; he says NASDAQ could fall 50% and still not look like compelling value, and the S&P has a long way down before it looks cheap.
3x Nvidia ETF is reckless
He calls a 3x leveraged ETF on Nvidia highly reckless, especially because Nvidia is already the largest company on earth and the ETF fell 50% in one day during the DeepSeek scare. It exemplifies extreme risk-taking and speculative behavior.
Tesla overvalued; could fall 80%
Tesla is a particular focus: it is a huge company with a small earnings base in a tough EV industry with falling margins, and its valuation is driven by faith in Elon Musk rather than fundamentals. It added $500 billion after Trump's election—more than nine times GM's entire value—despite Trump's hostility to EVs and subsidy risk, and Steve says Tesla could fall 80%.
Long Treasuries as Fed-crisis hedge
The Fed put is real but aimed at the economy, not speculators. If a serious market crisis forces aggressive Fed rate cuts, long-dated Treasury yields should fall and bond prices should rally, as the 10-year yield went from about 4% to near zero after 2008. He suggests call options on long-dated Treasuries and some bond exposure as a way to express volatility in a post-2008 framework.
Fed won't rescue Magnificent 7
He warns the Fed put is not designed to protect speculators in single stocks or the Magnificent 7. A narrow group of mega-cap tech stocks could lose several trillion dollars without provoking a Fed response unless the damage broadens and threatens the economy.
Raise cash; yields beat S&P
With the S&P at 25x earnings, its earnings yield is about 4% while cash yields more, so raising cash and locking in profits is the single best hedge for retail investors. Cash reduces stress and provides dry powder to buy a serious dip.
UK biotech cheap with global upside
UK biotech valuations are much lower than the US—at least half or more—yet the products are global. Steve relocated to Oxford and invests in Oxford University spinouts, giving him close local access to the Oxford, Cambridge, and London biotech clusters and cheap world-class IP.
Biotech risk/reward unprecedentedly attractive
Biotech has been in a terrible bear market since COVID, creating a collapse in confidence that leaves world-class intellectual property available for tens or single millions of dollars. He sees the current risk/reward as unprecedentedly good despite the long path to cash.
This The David Lin Report video, published January 31, 2025,
features Steve Diggle
discussing S&P 500 put options, NASDAQ put options, VIX ETFs, VIX, NASDAQ Composite, XLK, SPY, 3x Nvidia ETF, TSLA, Long-dated US Treasury call options, TLT, MAGS, CASH, UK biotech, Oxford University biotech spinouts, XBI.
11 trade ideas extracted by AI with direction and confidence scoring.
Speakers:
Steve Diggle
· Tickers:
S&P 500 put options,
NASDAQ put options,
VIX ETFs,
VIX,
NASDAQ Composite,
XLK,
SPY,
3x Nvidia ETF,
TSLA,
Long-dated US Treasury call options,
TLT,
MAGS,
CASH,
UK biotech,
Oxford University biotech spinouts,
XBI
