[nostromo]

It’s telling me I should short SPY and go long GameStop and AMC… Sounds suicidal to me.

[allyourhorses]

This is beta hedging, it works on the assumption that when SPY performs positively, your risky basket will outperform SPY, but if there is some systemic risk-off event, your SPY short will at least dampen if not fully cover any losses made in your risky basket

Good day, you lose -0.5% on SPY but gain +2% on AMC

Bad day, you maybe gain 0.5-1%% on SPY and lose -2% on AMC

[depaulagu]

But this is only true if expected returns and beta are constants, right?

[epapsiou]

Ha yes. We had same reaction. But it is what the market is pricing probabilities at. And if you see the returns market has been right so far. We are also skeptical. But numbers don't lie. I think it is a good way to size how much to buy if you really want to buy GME. Don't put all your money in but limit it to 10% as Kelly suggests

[Jarwain]

There's rumors/fears about SPY dipping from the next CPI report, could be causing options/sentiment to lean downwards in the short term.