OPTIONS WARNING

11/13/25 Prospero.ai Investing - 267th Edition (Midweek)

We wrote a letter on 02/09/25: Did We Discover That Institutional Risk Appetite Is Falling Off a Cliff?! It highlighted a concerning trend in options origination. If you haven’t read that letter yet, we strongly recommend doing so for context. Only a few weeks later, the market entered a steep bear run.

We are now seeing an even more troubling development. At Prospero, we pride ourselves on our “sensor system”- our framework for organizing information that gives us a window into Wall Street’s thinking. During our previous analysis, we noticed that some stocks were no longer generating long-term Upside values when the threshold for our “sensor” calculations was set at >320 days until expiration. To continue generating signals for many of the stocks that had “dropped off,” we lowered the threshold to 190 days.

You can see these stocks in the “long term drop offs 05_08_25” tab in the linked sheet. As the market improved, 64 of the 85 stocks once again had new options originated - an encouraging sign that aligned with market direction.

Which brings us to today…

Our users recently pointed out a new pattern: several stocks they follow no longer show Upside - even after we had already lowered the threshold to 190 days until expiration.

To continue populating signals, we reduced the threshold again, this time to 150 days. That’s when we uncovered even more alarming data. Stocks that had >190-day-to-expiration options available in early September 2025 no longer have them. A total of 223 stocks dropped off. (A caveat: our previous analysis focused only on large caps; this dataset covers the full universe.) We included the entire population here because 150 days is less than six months, hardly “long-dated.” Five months is not a long horizon. (You them in the 11/13/25 tab in the same linked sheet)

We also identified a new and unsettling trend: two ETFs: MGK (Mega Cap Growth) and VYM (High Dividend Yield) no longer have any options originating beyond 150 days. These represent very different risk profiles, making the pattern even more puzzling. To repeat: zero institutions are originating ANY options beyond five months for MGK, a Mega Cap Growth index.

We will continue monitoring this story closely. As of this writing, QQQ and SPY Net Options Sentiment are a combined 5. We remain on high alert.

A WORD FROM OUR CEO

We are being more aggressive with our hedging and pacing close to our yearly in a tough week. Our paper trading portfolio is 28% above the market on an annualized basis, with a 59% win rate against SPY benchmarks.

Short intro + learning videos with our full app tour as well as advice on how to use this letter.

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