# Tail SP 500 Call Options 

SPX is an index fund that tracks the SP500. Right now SPX is worth about 6100 per share. For individual stocks, even the large ones, you can usually only buy options through Dec 2027. However SPX has options that expire in Dec 2028 / 29 / 30[^wiy9xp5374p]. Such options with strike prices of 10K, 11K, or 12K seem extremely lucrative to me. **Max dated SPY calls are also a good option.** The obvious motivation is AI progress. But the naive analysis suggests these are a good way to get exposure to something we want anyway.

Current prices look like this: A very rough summary of the price curve is as follows: **Each 1K step halves the price. Moving forward one year halves the price. Here are the prices:**

![](https://39669.cdn.cke-cs.com/rQvD3VnunXZu34m86e5f/images/c9567f3b760bc047e0e7c6c2cb827d9111a24f82479bf55b.png)

  
I looked at the SP 500's cumulative returns over every 3/4/5/6 year period from 1927 to 2024. **There are 91 such six-year periods and 94 three year periods.** Here is the count where returns exceed the following thresholds:

![](https://39669.cdn.cke-cs.com/rQvD3VnunXZu34m86e5f/images/ad25d003fb5d1754b5a816879850f32bf6f950133539e5ca.png)

If we hit 14K by the end of 2028 then the 12K-28 calls will 100x. The 10k-28 calls will roughly 55x. You can do your own math even ignoring AI progress the naive base rate is favorable. Of course the past might not be like the present. But given that many of us expect rapid AI progress getting exposure to tail events is very attractive.   
  
**Unfortunately SPX options have very annoying tax treatment.** You always pay 60/40 long term/short-term cap gains tax. However, at the end of each year you are taxed on unrealized gains and update your cost basis. This is equivalent to selling on Dec 31st and rebuying at the same price on Jan 1st. This effectively forces you to rebalance each year. Its not the worst thing in the world. You can take profit, roll calls forward, pay taxes. But it is definitely not ideal given our goals.   
  
Amazing SPY, despite **SPY = SPX/10**, does not have this issue and is taxed normally. However SPY options only go til EOY 2027 and the highest strike is 900 (Equivalent to 9K SPY). Such calls cost about 6.6 per contract. If SPX goes to 10K those options will pay 100 per contract so 15x. This does not strike me as nearly as lucrative given the base rates, though it still looks good. I am willing to accept the worse tax treatment. If my gains get too high I will move to Puerto Rico in time to avoid paying taxes on my gains. 

**Calls on Individual AI related stocks tend to be extremely expensive.** The most extreme tail option on nvidia (147 stock price) is the Jan 2027 - 300 strike. These cost ~14 per contract. If Nvidia triples in 2 years these only pay ~10x. Microsoft options are also expensive, though more plausible. It is currently 446 per stock. The Dec 2027 - 640 strike contract costs 35. This would pay a more reasonable 20x if Microsoft triples in only three years. 

Feel free to double check my numbers (which I downloaded from macrotrends). [https://docs.google.com/spreadsheets/d/13EEJSLco9kwWqn5wDuTsI1cj6iVHFTBqPud9uWLILBQ/edit?usp=drivesdk](https://docs.google.com/spreadsheets/d/13EEJSLco9kwWqn5wDuTsI1cj6iVHFTBqPud9uWLILBQ/edit?usp=drivesdk)

I will say I delayed posting this because I was planning on being extra careful given Lesswrong norms. However my Calls have appreciated in the mean time. So I figure I should just post.

[^wiy9xp5374p]: The 2030 options just lunched and are not very liquid. Liquidity should improve.