Situational Awareness and the Impending Stock Market Volatility • Hacker News Board

Re: Situational Awareness and the Impending Stock Market Volatility

#31

Post by HarHarVeryFunny » Mon, Aug 03, 2026, 1:42 PM UTC

pliny wrote: post #22

bko wrote: post #7

This fund returned 47% in its first 6m and over 400% prior to the downturn. I don't understand how the investors didn't realize this was going to blow up. Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. When something is inevitable and there is a large enough position, this makes adversarial attacks likely. Every small drop causes an amplified amount…

>Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. Definitely not true, looking at their last 13f (filed in may 2026) their top3 holdings were BE, SNDK and CRWV which had 1y returns of 1,500%, 2,000% and 500% at the time of the filing. They accounted together for 15% of the fund (plus an unknown amount of exposure through options). These tickers show up…

Sure, but 15% of your portfolio going up by 1000% isn't going to give you an overall 400%+ YTD return, which is where SALP was before this drop, and obviously it is no secret that they were highly leveraged.

Aschenbrenner obviously understood diversification, but was overconfident and greedy and used leverage to boost returns. He was lucky that Citadel saw fit to step in and buy their portfolio rather than having to dump it into the market which would likely have been far worse.

Re: Situational Awareness and the Impending Stock Market Volatility

#32

Post by freeone3000 » Mon, Aug 03, 2026, 1:43 PM UTC

jfrbfbreudh wrote: post #8

lz400 wrote: post #6

I think the collapse of SA is very simple (as long as I'm not wrong about it of course hehe). SA weren't geniuses, they weren't sophisticated. They just did the same thing everyone else did, all in on semi-conductor, AI and memory positions. They got great returns because 1) everyone got great returns and 2) they were leveraged through their ears. In fact, not only they weren't geniuses, they were pretty bad at risk…

They were the alpha. Leopold called the boom in 2025 and returned 200% in 2025. He unfortunately got caught with his pants down.

Shoot, I called the boom in 2020 and returned 700% over the last six years. Where’s my fund? :P

Re: Situational Awareness and the Impending Stock Market Volatility

#33

Post by pliny » Mon, Aug 03, 2026, 1:50 PM UTC

HarHarVeryFunny wrote: post #31

pliny wrote: post #22

Earlier quoted context omitted.

>Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. Definitely not true, looking at their last 13f (filed in may 2026) their top3 holdings were BE, SNDK and CRWV which had 1y returns of 1,500%, 2,000% and 500% at the time of the filing. They accounted together for 15% of the fund (plus an unknown amount of exposure through options). These tickers show up…

Sure, but 15% of your portfolio going up by 1000% isn't going to give you an overall 400%+ YTD return, which is where SALP was before this drop, and obviously it is no secret that they were highly leveraged. Aschenbrenner obviously understood diversification, but was overconfident and greedy and used leverage to boost returns. He was lucky that Citadel saw fit to step in and buy their portfolio rather than having to…

I was answering his point that 400% returns are impossible without leverage, and my argument was that they were in the right stocks at the right time to achieve those kinds of returns without leverage. Since a lot of their portfolio is/was options without strikes or durations listed and the exact dates of their buys/sells is unknown it's not possible (AFAIK) to reconstruct their P&L exactly but it seems plausible to me that, given the stocks they were concentrated in and the quarters they start reporting those positions, that they could have gotten 400% returns in a year without leverage. If I were an LP reading their filings saying that (for example) they held 25% of the fund in Intel during a half year period where it went up 200%, plus some other similar holdings, resulting in overall 400% returns I wouldn't automatically conclude they were levered.

Re: Situational Awareness and the Impending Stock Market Volatility

#34

Post by HarHarVeryFunny » Mon, Aug 03, 2026, 2:00 PM UTC

cj wrote: post #25

pliny wrote: post #22

Earlier quoted context omitted.

>Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. Definitely not true, looking at their last 13f (filed in may 2026) their top3 holdings were BE, SNDK and CRWV which had 1y returns of 1,500%, 2,000% and 500% at the time of the filing. They accounted together for 15% of the fund (plus an unknown amount of exposure through options). These tickers show up…

Looking at their 13f filing (filed in may 2026), they had $8 billion of leveraged put options.

Interesting - I guess at least some attempt at hedging given that they held puts in some of the same stocks they were long on.

https://whalewisdom.com/filer/situational-awareness-lp

Or perhaps this was more of an attempt to lock in some profits while still riding it higher? It seems most of his puts were in the chip stocks while his portfolio was more focused on "next phase" datacenter/infra stocks.

Re: Situational Awareness and the Impending Stock Market Volatility

#35

Post by bko » Mon, Aug 03, 2026, 2:08 PM UTC

pliny wrote: post #33

HarHarVeryFunny wrote: post #31

Earlier quoted context omitted.

Sure, but 15% of your portfolio going up by 1000% isn't going to give you an overall 400%+ YTD return, which is where SALP was before this drop, and obviously it is no secret that they were highly leveraged. Aschenbrenner obviously understood diversification, but was overconfident and greedy and used leverage to boost returns. He was lucky that Citadel saw fit to step in and buy their portfolio rather than having to…

I was answering his point that 400% returns are impossible without leverage, and my argument was that they were in the right stocks at the right time to achieve those kinds of returns without leverage. Since a lot of their portfolio is/was options without strikes or durations listed and the exact dates of their buys/sells is unknown it's not possible (AFAIK) to reconstruct their P&L exactly but it seems plausible to…

Sure if you buy one stock and it goes up 1k percent it's possible. But that's unrealistic and being that concentrated is unacceptable for a fund.

Any sophisticated investor that read that a fund they were invested in a single name would be upset. Unless it's a special vehicle or they're activist and have a position for some strategic purpose. But just to let such a large percentage of your fund on a single name stock is insane.

I'll also add that options are essentially leverage. Leverage doesn't have to be borrowing it's just describing what $1 price change does to your position. You can buy at the money calls for 3-12% of the stock price. And they move up slightly less than $1 if stock goes up, so you're essentially getting 10-20x leverage. And if they're not above the strike price at expiration they're worthless

Re: Situational Awareness and the Impending Stock Market Volatility

#36

Post by antasvara » Mon, Aug 03, 2026, 2:08 PM UTC

Just to jump in: Citadel buying this portfolio says nothing about how Citadel feels about the stocks. It's the bread and butter of large HFT hedge funds; if you see someone that has to sell stock, you leverage the fact that you can buy all of it to get a discount versus the asset value. Reports are saying that Citadel was able to buy the portfolio for ~10% under the market value, all at once. That's a no-brainer because you both get a discount and avoid driving the price down by buying small pieces over the course of a week.;

If I were a betting man, I'd bet that Citadel was also selling to Situation Awareness while they were on the way up. At some point, SA had juiced their stock prices so much that no "rational" investors (those that have a view of the stock based on some amount of fundamentals) would be on the other side of the trade. It's retail investors, bandwagon investors, and Citadel-caliber funds. This situation (over-leveraged company blows up due to some volatility) happens all the time in commodities trading, which is where Citadel started.

Re: Situational Awareness and the Impending Stock Market Volatility

#37

Post by cl42 » Mon, Aug 03, 2026, 2:10 PM UTC

drdrek wrote: post #30

This article is stating the obvious that is written in many different places (except the ETF angle) while sounding like its some kind of expert being ignored. I would presume AI is afoot. Stopped writing the comment, went and clicked the logo, yup a personalized AI reporting service.

Author here. There is absolutely no AI used in any of the writing I do. We use AI to track news and better understand global and economic developments.

Re: Situational Awareness and the Impending Stock Market Volatility

#38

Post by PowerElectronix » Mon, Aug 03, 2026, 2:12 PM UTC

bko wrote: post #7

This fund returned 47% in its first 6m and over 400% prior to the downturn. I don't understand how the investors didn't realize this was going to blow up. Returns like that are not asymmetrical and can only be produced with leverage, at least when you're trading paper. When something is inevitable and there is a large enough position, this makes adversarial attacks likely. Every small drop causes an amplified amount…

They thought it was gonna be different this time.

Re: Situational Awareness and the Impending Stock Market Volatility

#39

Post by antasvara » Mon, Aug 03, 2026, 2:18 PM UTC

lz400 wrote: post #6

I think the collapse of SA is very simple (as long as I'm not wrong about it of course hehe). SA weren't geniuses, they weren't sophisticated. They just did the same thing everyone else did, all in on semi-conductor, AI and memory positions. They got great returns because 1) everyone got great returns and 2) they were leveraged through their ears. In fact, not only they weren't geniuses, they were pretty bad at risk…

Even in the optimistic case where SA did have alpha, the position sizing was way out of whack. Based on the volatility of the stocks they were buying, the Kelly Criterion meant you'd need to expect a 900% annual return on the stock before leverage to justify being 4x levered.

What guys like Leopold either don't understand or understand but ignore is that being right directionally and being right on market timing are two different skillsets. When you've juiced a stock by 800%, the existence of alpha pales in comparison to your vulnerability to the stock market.

Re: Situational Awareness and the Impending Stock Market Volatility

#40

Post by pliny » Mon, Aug 03, 2026, 2:29 PM UTC

bko wrote: post #35

pliny wrote: post #33

Earlier quoted context omitted.

I was answering his point that 400% returns are impossible without leverage, and my argument was that they were in the right stocks at the right time to achieve those kinds of returns without leverage. Since a lot of their portfolio is/was options without strikes or durations listed and the exact dates of their buys/sells is unknown it's not possible (AFAIK) to reconstruct their P&L exactly but it seems plausible to…

Sure if you buy one stock and it goes up 1k percent it's possible. But that's unrealistic and being that concentrated is unacceptable for a fund. Any sophisticated investor that read that a fund they were invested in a single name would be upset. Unless it's a special vehicle or they're activist and have a position for some strategic purpose. But just to let such a large percentage of your fund on a single name stock…

I don't have anything to say about their concentration beyond that if you read their early 13Fs (ex https://13f.info/13f/000204572425000006-situational-awarenes...) they were in fact "that concentrated" which is why it's plausible they got 100s of % returns without leverage. Re options being leverage - everything you said is true but unfortunately the public filings dont have strikes or durations so it's not possible to say whether they bought short dated otms with 0.05 delta or leaps with close to 1 delta or something in between.