Pod Insights The Prof G Pod with Scott Galloway Prof G Markets: The AI Wars, Bed Bath & Beyond’s Share Sale, and Scott’s Options Trade About this episode This week on Prof G Markets, Scott breaks down the state of play in the AI wars as Microsoft and Google compete in a lightning fast hype cycle. Then Scott breaks down why institutional investors would pour more money into Bed Bath & Beyond when it's on the brink of bankruptcy, and why he made an options trade on the stock’s volatility.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:49 Speaker 01 This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an Ultra. Because it's not just a superior-like beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser-Busch InBev Michelob Ultra Beer, St. Louis, Missouri.
1:18 Scott Galloway? This week's number, $4 billion. That's how much Americans will spend on chocolate this Valentine's Day season, up 5% over last year. No joke, I did for the first time last night mushroom chocolates. And I like me.
1:45 Scott Galloway? Welcome to Prof G Markets. Today, we're discussing the AI wars, Bed Bath & Beyond's share sale, and why I made a trade on that stock's volatility. Here with the news is Prof G Media Analyst Ed Elson. Ed, what are you doing for Valentine's Day?
2:02 Ed Elson? I haven't made plans. I have a date tonight though, so that's good.
2:06 Scott Galloway? So you're hoping that converts into some sort of Valentine's Day thing? That's pretty optimistic.
2:11 Ed Elson? Yeah, yeah, after one date, we'll see what happens. Can you explain your psychedelics experience last night?
2:18 Scott Galloway? I'd hardly call it psychedelics. It's, I have trouble relaxing. Should I say that, "I have trouble relaxing"? No, it's mostly just about hedonism. Last time I've been mushrooms was in...
2:28 Speaker 03 Joshua Tree and I first I threw up and then I just couldn't stop laughing. It was so much fun and I was with a bunch of college buddies. I think it was my senior fifth year and I would ask you if you've done mushrooms, but I'm economically secure so I can speak openly about my drug use. You shouldn't yet.
2:45 Ed Elson? Yeah, exactly. No comment.
2:46 Speaker 03 Yeah, it was nice. It was fun. It was easy and I'm using it as a means of trying to reduce my alcohol consumption, which I think is actually harder on your body than THC. Enough about that. And by the way, just a quick tip on Valentine's Day. My girlfriend told me that she didn't want to do anything for Valentine's Day. She said, let's agree to do nothing for Valentine's Day. But what I didn't realize that is that she wasn't talking about gifts. She was talking about sex.
3:11 Speaker 03 Okay. What else? Tell us about what's going on in the markets here.
3:14 Ed Elson? Let's start with our weekly review of market vitals.
3:24 Ed Elson? The S and P 500 was volatile as earnings rolled in. The dollar bounced on signs of a strong labor market and continuing interest rate hikes. Bitcoin dipped below 23,000 to a two-week low and the yield on 10-year treasuries rose. Shifting to the headlines. Turkey's stock exchange suspended trading after two catastrophic earthquakes sparked a $35 billion sell-off. That's the first time the exchange has shut down in 24 years. As a follow-up to our discussion last week about the Adani Group Hindenburg short, Gautam Adani's bankers sent him a margin call asking him to put up more than $500 million on a personal loan after his stock plummeted. Instead of posting more collateral though,
4:09 Ed Elson? he simply wrote them a check of $1.1 billion and repaid the loan in full. For an explainer on margin calls, check out our episode from October 17. CVS is acquiring Oak Street Health, a medical care company for $10.6 billion. Uber reported record revenue, up 49% from a year earlier, and said it expects to achieve operating income profitability this year. Meanwhile, Disney beat on sales and earnings. In the first earnings call since his return, CEO Bob Iger unveiled a restructuring plan, which includes cutting 7,000 jobs and $5.5 billion in costs. Three billion of that will come from content.
4:51 Ed Elson? The company is also reorganizing into three units: entertainment, ESPN, and parks and experiences. Disney's stock rose about 6% in after-hours trading, and the next morning activist investor Nelson Peltz, who we talked about on this podcast, said, quote, "The proxy fight is over." Scott, what are your thoughts?
5:13 Speaker 03 Not a lot there. I mean, at first, it's obviously, we hope the best for the rescue efforts in Turkey. You know, the small silver lining around these types of natural disasters is, I think, that's somewhat of an opportunity, and that is for the West to really weigh in and help them with whatever resources they can. The Donny Grove, it's a baller move, you know, the stock is up. I would bet it's probably a good time to go short the thing now, because paying off this loan doesn't do anything about the corruption, it just provides liquidity or reduces the debt, avoids a margin call. CVS is super interesting. CVS is a management team that's like, yeah, we're just not going to, you know, fade slowly into the sunset here. We're going to do some baller moves.
5:57 Speaker 03 It's still a very big company, decent market cap, and they're kind of forward-integrating or reverse-integrating to actual healthcare. They have those Minute Clinics, or whatever they're called. They're trying to get more involved in insurance. They're taking advantage of the fact they have such incredible custody of the consumer. And that's become paramount, and that is if you own the relationship with the consumer, you can sell them other things, you can steer them towards different products and services. So that's an interesting acquisition. I don't know much about Oak Street Health, and whether they overpaid or underpaid. The one that's more interesting relative to the news was that Uber... Revenue of forty nine percent year on year and in the quarter Uber registered two billion trips. It's just this dramatic. I mean, this is at the end of the day, my buddy,
6:41 Speaker 03 Richard Kramer at Areté, I never know what the fuck it changed your name, Richard. Anyways, it says that Uber is essentially a marketplace pairing buyers and sellers. In this case, people who want to ride and people who are willing to give them a ride. They have, when you think about it, a great interface. They have your credit card and they make it a very seamless market transaction. In this case, ride hailing and his thesis all along is that they'll be able to get into other things. But this reflects pricing power. It reflects that there might be a light illuminated at the end of the profitability tunnel or the tunnel towards profitability because if they can grow their revenues like this, they should be able to become a substantially profitable company. And my sense is they're just rolling over everybody. I don't know if you remember it, but three or five years ago, people would
7:25 Speaker 03 say Uber and Lyft. Now it's just Uber. It really is. It's Lyft is kind of a pimple on the elephant or an afterthought. And then the Disney thing is sort of interesting. We got that prediction wrong. I predicted that Disney would put Pelts on their board. They did not. But it's pretty obvious they came to some sort of accommodation. And my guess is that Iger called and said, so you want us to find efficiencies? That's your kind of your big thing here. You want us to buy the rest of Hulu? Well, actually, we're contemplating selling Hulu and I'm going to lay off 7,000 people, cut five billion in costs. Does that feel right as Randy? And my guess is Nelson said, yeah, that feels good. And then Bob said, I don't want the distraction here. You can declare victory. It can be your idea
8:07 Speaker 03 if you want. So it's sort of a win for Pelts. It's a win for Bob Iger, who's seen this decisive after kind of, you know, I shall return in his first action at Sea or big action stocks up. So it feels like win, win, win all around. Do you own Disney stock yourself? I don't. I love the stock. There's just very few companies that have this diversity. Of reliable, robust cash flows. Nothing has the flywheel effect of Disney and their characters. The movie franchises they have between Star Wars and Pixar and Marvel. I mean, they just have so many assets and so many moats around this business and such pricing power. And then Disney Plus has cost them a ton of money because they've had to go toe to toe
8:52 Speaker 03 in this crazy nuclear arms race that is content spending on streaming. But Disney Plus, you know, sends a very clear signal about what it is. And I worry that actually Hulu doesn't send that clear a signal. It's very dependent upon individual hits. I do get my live TV through Hulu. It's very expensive, but that's how I get live TV. So I pay 85 bucks. So occasionally I can watch Anderson Cooper or the State of the Union address. Worth it. Worth it. Because I don't know if you know this, Ed, AC and I are very close, we're very good friends. So I just feel like it's the right thing to do. Anyway, it's an unbelievable asset and I think the stock's off, you know, a third or 40% or something. I think Disney is a great long-term hold.
9:32 Ed Elson? Okay, we'll be right back after the break with the state of play in the AI wars and a look at Bed Bath & Beyond's share sale. Stay with us.
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12:07 Ed Elson? We're back with Prof G Markets. Microsoft and Google both held events last week unveiling their new AI-powered chatbots, and it was a tale of two stocks. On Tuesday, Microsoft showed off its search engine Bing with new AI capabilities thanks to a partnership with ChatGPT. Microsoft's stock popped more than 3% after that event, bringing its market cap above $2 trillion for the first time in months. A day later, Google revealed its own chatbot, Bard. However, after this announcement, Google's stock fell nearly 8%, erasing more than $100 billion in value. We'll get into AI in a bit more depth in a second, but Scott, why do you think there was such a divergence in the market's reaction here to basically the same announcement?
12:52 Scott Galloway? I think people are looking for reasons to like Microsoft and not like Google right now because the general consensus in the market is that Microsoft is ahead of the game here and has made some visionary early investments and has sort of this...
13:05 Speaker 03 I don't know, Maverick feels it right now because it has less to lose. You know, one of these companies has 93% share of search and one of them has four, I think.
13:14 Ed Elson? Three, yeah.
13:15 Speaker 03 And the rest is some, some, you know, other, whatever it is, Baidu or Vintonco. I guess they break out by different regions, but the Google launch felt hurried and reactionary and catch up. And then self-inflected wound, I guess the question they asked it about the web telescope that that actually got wrong. So this feels like people are looking for a reason to take Google's stock down. And there really is an existential threat here. And that is if you spend a lot of time on chat GPT, which I would suggest everybody do. And if you have the money, 20 bucks a month, such that you can use it anytime and feels more powerful or actually, I don't know why you pay 20 bucks. I did anyways, that's how I roll.
13:58 Speaker 03 Actually, I was probably under the influence of mushroom chocolates, but I believe when Microsoft launches Bing powered by OpenAI, whatever they're going to call it, you know, Bing GPT. So far, the demo is a big head fake. You're not really demoing it yet, but if it gives you one really good answer, which is kind of what a prediction engine should do, you could see Bing's share quintuple overnight. And then, you know, whether that holds that share or not, uh, you know, remains to be seen, but the market anticipates that. The market anticipates that Microsoft is in the best position to leverage the excitement
14:39 Speaker 03 around artificial intelligence and has kind of a first mover advantage here. And I think that's reflected in the stock price. Do you have any thoughts around this, Ed?
14:48 Ed Elson? Well, I found one quote that Satya Nadella said really interesting. He said, when he was talking to the Financial Times, he said, from now on, the gross margin of search is going to drop forever. And he was saying this proudly, you know, that he's basically going to use AI to bring up the costs of search, uh, because, you know, it needs to be more sophisticated now. You need to hire sophisticated engineers to build these products. Um, and basically saying that just by bringing up the costs of search as an entire sector, that's going to basically give Microsoft some sort of edge over Google. And all that I can glean from that is. He just wants to disrupt Google in any way possible because of that 95% market share.
15:33 Ed Elson? And it doesn't really matter how he does it, even if he pays tens of billion dollars to acquire ChatGPT. But yeah, I think that sort of falls in line with what you were saying, that anything to begin to eat Google's lunch. And that's a that's a positive sign for Microsoft.
15:50 Speaker 03 Yeah, it's I think what he's saying, though, is that in so many words is that Google is about to lose their monopoly. And the primary means of establishing monopoly abuse is pricing power. And so when he's saying margins are about to come down in search, what he's saying is the company that controls 93% is going to have to lower their prices because they're about to get competition. In addition, the dynamics or the complexion of the business model of search could change dramatically when you're just offering people one answer as opposed to 15 different answers. I mean, it's just fascinating. If you look at search over the last 20 years, it used to be initially kind of Google was you type in something and it would have two heavily shaded answers at the top.
16:35 Speaker 03 And they said add, it's like, okay, and you would ignore them and go to the next ones, the organic links. And then slowly but surely they lightened that shading to the point where you didn't know what was an add and what isn't. And on some searches, if you type in best hotel in Orlando, the entire first page, two thirds of it is going to be links that people are either paying for or taking you to places that Google can further monetize, like their hotel booking engine. And the idea of just trying to present one answer is an existential threat to Google. In addition, the processing power, my understanding, is costing the single digits of cents to actually process the query.
17:15 Speaker 03 Whereas Google, I think it's one seventh the cost. So costs going up, margin power or pricing power going down, more competitors. The player here, and I'm an investor, I'm an investor in Yahoo. I know the guys at Apollo and they gave me an opportunity to invest in it. And I've always loved Yahoo. Yahoo is my home screen and it's very old school, but I still think Yahoo does the best job on finance. And I like the people there. I like the content. I always thought it was kind of undervalued. I would argue that Yahoo should be partnering with, you know, chatbot Joey Bagadonuts or whoever's doing an interesting job, maybe even Alibaba. I don't know who it is who has something interesting and just put it front and center because they
17:58 Speaker 03 have a lot less to lose. Yahoo is 1% share and it's even at 1% share, it's still a very profitable business. But I would have thought that they have a lot of leeway to do some really interesting stuff around AI.
18:11 Ed Elson? The other thing about these other companies getting into AI, that is happening. So Google and Microsoft are the leaders, but lots of other companies are building their own chatbots. So last week, Baidu, which is sort of the Google of China, they unveiled Wenxin Yiyan. That's their own chatbot. It's going to launch in March. Alibaba is also announcing it's releasing a chatbot. Meta actually had a chatbot called Galactica and that was released in November. Almost immediately though, Galactica started spreading misinformation and hate speech.
18:42 Speaker 03 What do you know?
18:43 Ed Elson? So much I had to take it down. But then there are all these other companies that are working on AI for other functions. You know, Snap's using it for augmented reality. Apple's using it for Siri and even they said car crash detection technology in the iPhone. Amazon has a whole suite of AI services for AWS. And then there's this giant ecosystem of startups that's popping up. VC investment in generative AI has increased 425% since 2020. So this entire tech wave is moving really quickly. And my question to you is, have you ever seen a hype cycle move as fast as this one?
19:20 Speaker 03 Oh, never. It's, it's, um, I mean, war's broken out here. There's been AI around for a long time and then ChatGPT comes along and it just set up an arms race and you can bet that every one of these players is like, we've been working on AI and these guys come out and dominate, I mean, just dominate the headlines. And I think there's a chance, the big opportunity here is around business model. And that is the thing that really has fucked the internet and society is that the internet has basically now been totally fueled and financed by advertising.
19:58 Speaker 03 And when it's an ad model, it's an attention model. And when attention is the goal, the motivation, the resource, the rare earth material you're trying to mine, the algorithms say, well, how do we just capture more and more of people's attention? And it's like enraging them, showing them weird content, conspiracy theory. The subscription model, while there's some downsides, you create two worlds, one people who've afforded subscriptions and one who can't. But in general, it's a much healthier ecosystem. So I would argue with AI, if OpenAI, which was initially created to try and protect the world from some of the externalities of artificial intelligence, if they want to stay somewhat true to that mission, which they've already shit canned as they smell Benjamins, they would really try and encourage and show a future around subscriptions, motivate
20:43 Speaker 03 people to pay $20, and then just having a compact with the consumer that Google has broken. We're going to take you to the best place. We're going to try and give you the best answer, not the answer that gets you to go somewhere else we can further monetize, or the answer that someone is paying us to give you.
21:06 Ed Elson? US retailer Bed Bath & Beyond, which is on the brink of bankruptcy, just secured more than $1 billion in an equity sale. The investor behind that capital raise is Hudson Bay Capital Management, which has provided $225 million upfront and up to $800 million over time in exchange for convertible preferred stock. What is convertible preferred stock? You can think of it as a hybrid between debt and equity. It's slightly riskier than a regular loan, as you're not the first in line to get your money back in the event of a bankruptcy. But the upside is that if the company survives, you can convert your investment into regular shares. So Bed Bath & Beyond will use that cash to pay off its creditors.
21:49 Ed Elson? Last month, the company missed its interest payments and defaulted on its debt, so this round of financing really is a lifeline. Scott, this deal definitely makes sense for Bed Bath & Beyond, but Hudson Bay is essentially investing in a dying, almost dead company. Why would they do this?
22:10 Speaker 03 A lot of people look at this and say, okay, they're just pouring good money after bad. But here's the thing. One of the wonderful things about America is not that we embrace failure, but that we tolerate it. And that is no better depicted or epitomized or reflected in our bankruptcy laws. And that, as we say, okay, Bed Bath & Beyond, you're a $7 billion company or revenue company. I don't know.
22:33 Ed Elson? Yeah, like I think it's $7 billion and with a market cap of around 300 million.
22:37 Speaker 03 Right. And it's got 760 stores. But bankruptcy is essentially says, there's chapter 11 and there's chapter seven. Chapter seven is this shit makes no sense. Close it down, put a lock on the door, sell the furniture and get whatever pennies on the dollar and give it back to the debtors. And it's important to notice that the debtors are first in line. You get any money from selling the company or figuring it out, it goes to the debtors first. And then the equity, the tail of the whip, who demand higher returns, get totally wiped out in a bankruptcy. So retailers are sort of purpose built for bankruptcy. And that is what you get to do is if you declare bankruptcy,
23:17 Speaker 03 you get to go through those 760 stores, cherry pick the ones that are working on a four-wall unit economic basis. And that might be 300 of them and go, okay, 300 of these stores are still very profitable. Pick the ones you want to hold on to and then go to your debtors and say, we can't sustain this debt load. We're going to convert it to equity and new co. And you're going to reduce the debt load. So we have lower lease payments and we have much lower debt interest payments. And now we have a company that might actually be reborn. So chapter 11 is there's still something here. It's a good company. There's good assets, a good brand. It's just got a bad balance sheet and really bad lease commitments. So they look at that and they think, okay, if it goes bankrupt.
24:02 Speaker 03 We don't convert these shares into equity, but we get some, most, all of our money back. And if this $7 billion retailer shows any signs of life, it might become worth, say, one tenth of revenues, and we double our investment and convert to stock. So convertible debt in a, in a situation like this can actually be quite lucrative.
24:24 Ed Elson? Yeah, you, you mentioned on our editorial call earlier that you've had experience with this person, specifically with Eddie Bauer. Could you take us through what happened there?
24:32 Speaker 03 Yeah, so Eddie Bauer, iconic retailer, opened a bunch of stores and was struggling. And the creditors and investors asked me to go on the board and help them work through bankruptcy filing. And again, got to go through, pick the stores we wanted, and we knew there was value there. So the Eddie Bauer brand, we could have just sold the brand to a licensing company who would put the brand, lay off all the employees, close all the stores, and put the brand on backpacks, fishing poles, you know, fishing vests, flannel shirts. And the brand alone was probably worth somewhere between 100 and 300 million to a licensing company. So there was value there. It just didn't make any sense in the context of a larger company with all these expenses, where I think it had 1,200 employees, a bunch of stores. So I went on the board there, and we did, in fact, take it through bankruptcy.
25:17 Speaker 03 It came out of bankruptcy. A private equity firm bought it, thought there was real potential. I believe the debtors got all of their money back. Most of the employees held their jobs. And then again, I think it went bankrupt again. I, I was well off the board by that time. Unfortunately, I have personal experience here. And then as a company, I started Red Envelope in 1997, went public on the NASDAQ in 2002. Just the, the land of like, all bad karma for me. And Wells Fargo pulled our credit line and boom, we were literally Chapter 11 in like, what felt like 72 hours. It was probably 72 days. So all of the equity holders, including yourself, get totally wiped out. But all the debtors, that is the people who have shipped you products and haven't been paid yet.
25:59 Speaker 03 The employees, everyone got paid because Liberty Media came in and bought the company for more than the debt or more than the money was owed. So no one got laid off, the equity got wiped out. And then it kind of went on because there was value in the company. That was very painful for me because obviously my investment was reflected in the form of equity. But bankruptcy is, it's a feature, not a bug of American society. It says, okay, even if you're in over your skis, even if you have a bad balance sheet, even if you have too much debt, if there's value here, we're going to try and figure out a way to hold on to the value.
26:35 Ed Elson? The difference here that I'm seeing is that there's this new, there's this new thing called a meme stock and that, that is what Bed Bath & Beyond is. And that's a compelling argument that you've made that, that Hudson Bay actually likes this company and they're making a long-term investment play. But do you think there's also a possibility here that Hudson Bay sees this meme stock as sort of a meme stock engineering opportunity that they can capitalize on the volatility and then eventually dump it on retail investors?
27:11 Speaker 03 My guess is they're saying, if for whatever reason Reddit takes a shine to this thing again, and the meme stock animal props up its head again, and for some reason Bed Bath & Beyond skyrockets for irrational reasons, then great. I don't think they're counting on that. I would call that, that's sort of a low probability, high upside outcome. But I don't think they're making the investment assuming that it's going to become a meme stock again. But I'm sure in the back of their minds, they're like, okay, there's a one in 10, one in 50 chance Reddit gets all hot and horny for this thing again, and the thing goes to 10, 15, 20 bucks a share, we convert and get the hell out of Dodge. More power to you, young people who think you're sticking it to the man. So I'm sure that's like part of their quote unquote calculation, but that's not the reason they're making this investment.
27:56 Ed Elson? So Scott, you told us on our editorial call that you actually wrote options on Bed Bath & Beyond stock. And it turns out that you have $900,000 on the line here. We'll be back after the break to discuss why.
28:29 Scott Galloway? Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The Regentic Trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?
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29:37 Speaker 01 This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an Ultra. Because it's not just a superior-like beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser-Busch InBev Michelob Ultra Beer, St. Louis, Missouri.
30:12 Ed Elson? We're back with Prof G Markets. Scott, yesterday in our editorial meeting, we were discussing the Bed Bath & Beyond news and you described a trade that you'd made on the stock BBBY, a pretty big trade. We found this fascinating and I think our listeners would be interested in both the mechanics of the trade and your rationale. So this was an options trade and we've discussed some of this before on markets, but the specifics can get hard to follow. So let me describe how I understand the trade and tell me if I've gotten this right. So last week, you sold 4,000 put option contracts on Bed Bath & Beyond at $2.50, expiring in four days at 25 cents a share.
30:54 Speaker 03 You're right. I wrote 4,000 contracts or sold 4,000 put contracts, which is the equivalent of a put agreement on 400,000 shares with a strike price of 250, expiring Friday at 4.
31:07 Ed Elson? So let me just unpack that. A put is a kind of option. It gives the buyer of the put the option to sell you shares of Bed Bath & Beyond at $2.50 at any point during a given timeframe. In this case, the timeframe was what you set, four days. In exchange for that option, the buyer paid you 25 cents per share. Now, the buyer is betting that the stock is going to drop below $2.50 because if it does, they can buy the stock at the lower market price and immediately sell it to you for 250, i.e. they win. If it stays above 250 though, the put simply expires and they'll lose because they paid you 25 cents per share on that option for basically nothing.
31:52 Ed Elson? Now, each contract is an option on 100 shares. So at 25 cents per share, you sold each contract for $25 and for 4,000 contracts, that means you were paid $100,000. The risk though, is that if the stock goes below 250, you will have to honor the contract and buy it at 250. So if the stock goes to, say, 225, you'll break even. You made 25 cents per share when you sold the puts, but now you're going to lose 25 cents per share when you buy them back. If the stock goes to zero, which isn't likely, but it's your worst case scenario, you have to buy 4,000 worthless shares for $2.50, which costs you a million dollars.
32:36 Ed Elson? And that's against the 100,000 that you made when you sold the puts. So that's a net loss of $900,000. Do I have that right?
32:44 Speaker 03 That's exactly right.
32:45 Ed Elson? Okay. Scott, the question here is, why did you do this?
32:50 Speaker 03 What I do is, once a week, I look at the most volatile stocks. So when I saw that Bed Bath & Beyond plunged 45% because it looked like it was hurling towards bankruptcy, I thought two things. One, it takes longer than people think for this to play out, even if it's on its way to bankruptcy. The stock on Tuesday was trading at $2.62, and I could get 25 cents for writing a put that expired on Friday at a strike of 2.50, meaning that if it did not go down by 15% by Friday, I make money. If it stays the same, I make all the premium. If it goes up, I make all the premium.
33:33 Speaker 03 If it goes down 12 cents and still above 2.50, I make all the premium. If it goes down to 2.25, I still make money until 2.25, and then I break even. It could go all the way to zero, and then I could potentially lose $900,000. People want to avoid pain so much, it's a basic human attribute, that they avoid things like this. So I go out, I write the put, because I believe the likelihood of the stock going down 15% in the next 72 hours is less than people think. Now, having said that, you can get hurt really badly. Two key things here. One, don't try this at home. Unless you have substantial capital, you probably can do this, but B, you don't want to.
34:16 Speaker 03 And two, I don't spend more than 30 minutes a week on the phone or examining this or looking at this. I don't want to spend a lot of time thinking about this. But what you want to do is, you want to model a scenario. If you decide to do this, where the stock goes to zero, and assume a black swan event, and assume, okay, it's okay to be bummed, but it shouldn't change your life. And I model those things. So losing $900,000 is my maximum out of pocket, and that would be a bad day for me, but it wouldn't change my life in any way. I'm disciplined about this. I do it across two or three stocks every week. And generally speaking, despite some very ugly weeks that really give you some indigestion, I've been writing calls or shorting Truth Social for a long time. You think, wow, Scott,
34:58 Speaker 03 you've made a lot of money. Yeah, over the long term. But in one week, when I wrote calls against Truth Social, it went from 50 to 95. And I had to write a really big fucking mushroom chocolate layered check for that person who showed up and said, okay, you have to go buy these and I get to buy them from you at 50 bucks. And I think I got maybe three or four bucks in premium. Anyways, I find if you're disciplined in this market with a lot of new money into the market, a lot of volatility, I find this is a really good strategy. But again, this is not for the weary or for people who don't have strong stomachs. Two, do not spend a lot of time thinking about this. And three, make small trades that even if they go horribly wrong, is not going to
35:43 Speaker 03 impact your life.
35:44 Ed Elson? Sort of a personal psychological question. When you lost all that money on Truth Social, did you tell anyone? Did you talk to your wife about it? Did you, did you get it off of your chest in any way? Or did you just sort of eat the loss and move on?
36:02 Speaker 03 I'm transparent with people in my life about my wins and losses, but I aggregate them. I won't talk about stuff in the moment, like, oh, I lost this this day or I made this day. I find that people, generally speaking, talk a lot more about their losses. I remember my mom's friend, my mom lived in Vegas and her friend was always talking about all the money she made in slot machines. I'm like, well, she's omitting when she loses because over time, it's impossible to win in slots. I just don't care who you are. So yeah, so I'll be very transparent. This year, year to date, I'm down. But I find that one of the things you have to do as investors be very unemotional. I think the strategy works. And at some point, if I kept losing week after week after week, I'd have to stop for financial reasons. But I've been doing it every week for the last three and a half
36:47 Speaker 03 years. And when I look at the whole year, the premiums have outweighed, sometimes significantly outweighed what I've had to write checks for. But no, I'm not, I don't come home and say, oh, my God, I lost this or I made, you know, honey, honey, it's champagne and cocaine for dinner. That's just, that's just not how I roll.
37:07 Ed Elson? Do you have options positions in any other companies right now?
37:10 Speaker 03 Yeah, I wrote it options. I wrote what's called a covered call option. So I wrote options exactly equivalent to my position in Airbnb. In my bigger holdings, I think of them as apartment complexes and the way I collect rent is I sell out of the money calls. So say Airbnb is trading at 120. If you write an out of the money call at 130, if it goes to 135, you technically just gave up the upside because the underlying stock goes up. But if it doesn't go to 130, you collect a little bit of rent every month. And I've been doing that every week on my biggest holdings for the last two and a half or three years. And that's worked out. It's called covered calls. That's not as risky. You technically give up some upside if the stock surges. But I generally think, okay, I'm going to write a call that's three or 5% out of the money.
37:54 Speaker 03 And if the stock doesn't go up three or 5%, I just collect the premium. Some weeks are tough. You're like, oh, it's a bummer to have missed out on the upside. But over time, I find if you're disciplined, you collect rent on that stock.
38:08 Ed Elson? Okay, well, we'll have to tune in for next week's episode to see how Scott did on this trade.
38:13 Speaker 03 Yeah, these are famous last words. This feels really uncomfortable to be honest.
38:17 Ed Elson? I kind of just want to check in on these trades every week now. We should create Scott's options section in this podcast.
38:23 Speaker 03 We had that. Someone made an anti-Galloway index because I made a terrible call on Tesla. Most of the other ones I said were going down have gone down, but Tesla went up 700%. So the anti-Galloway ETF.
38:36 Ed Elson? Well, that index is bullshit, though. That has, just so everyone knows, that index basically omitted all of your wins.
38:44 Speaker 03 Well, since Tesla, even with its recent run ups, gone down 66%, I noticed the people tracking this index decided to stop tracking it because it didn't fit their narrative.
38:54 Ed Elson? Yeah, exactly. Anyway, that whole meme movement pisses me off, but maybe I'm just protective of my boss. Anyway.
39:01 Speaker 03 Turn to mushroom chocolates. It'll help help deal with that anger.
39:07 Ed Elson? Let's take a look at the week ahead. We'll see the Consumer Price Index for January as well as retail sales, business inventories, building permits, and housing starts data. And we've also got earnings from Airbnb, it's a big holding of yours, Shopify, and Roblox. Do you have any predictions for us?
39:25 Speaker 03 So my prediction is I think Disney, I used to think Disney was going to acquire the rest of Hulu. I think Disney is going to sell Hulu. I've never thought that Hulu has its kind of center of gravity. Disney needs to reduce its balance sheet. It has a great, very well-positioned, clear signal, clear reason for being streaming network with Disney Plus. To me Hulu is sort of the island of misfit content. I don't quite get it. Occasionally they have a hit. I think they've done some good work, but I don't. This feels to me like a company that's not obvious Disney should own. They think they can get 20 billion for their stake. So I think Disney is going to sell. And also Warner Brothers Discovery has totally done a 180 on their stated strategy and said
40:10 Speaker 03 they're going to keep Discovery Plus a distinct streaming network. And initially they'd announced that they were going to bundle it to make this one kind of omnibus, jumbo, you know, Kenneth Moss macho streaming network with a lot of stuff on it. And they've decided not to do that. And I think that reflects a couple of things. One, I think it reflects that they vastly overpaid, they need to begin divesting assets, and they're going to package this thing, pretty it up, and sell it. So two things. You're going to see Disney sell at stake in Hulu, and you're going to see Warner Brothers Discovery sell Discovery Plus. That's all for this episode. Our producers are Claire Miller and Jason Stavers. Benjamin Spencer is our engineer, and Drew Burrows is our technical director.
40:53 Speaker 03 Special thanks to Catherine Dillon and Mia Silverio. If you like what you heard, please follow, download, and subscribe. Thank you for listening to Prop G Markets from the Vox Media Podcast Network. Join us on Wednesday for Office Hours, and we'll be back with a fresh take on markets every Monday.
41:49 Speaker 03 Jesus Christ, let's just pray. If the thing goes to zero tomorrow, I'm gonna, it's gonna be rough.
41:53 Ed Elson? Not me. If it goes to zero, I make $223.
41:56 Speaker 03 Boom. Jason, Jason sent me, did you do it? Jason's like, fucking Jason takes the other side of the trade and sends me the trade confirm.
42:06 Ed Elson? That's right. Balling out.
42:08 Speaker 03 That is so Jason. I'm like, oh, he, he thinks his boss is smart. I'm like, oh, wait, he, he bought calls or wait, no, he,
42:16 Ed Elson? I bought your contract.
42:17 Speaker 03 That's right. You're on the other side of the trade.
42:19 Ed Elson? Yeah, I am on the side of your trade and you are winning right now.
42:21 Speaker 03 He bought puts.
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Previous No Mercy / No Malice: Disinflation Next Office Hours: The Kroger-Albertsons Merger, An Argument Against Seed-Stage Investing, and Taking Advantage of the “Silver Tsunami” Page updated September 30, 2026 · transcript and summary are machine-generated
