Reflections and Lessons
09/01/25 Prospero.ai Investing - 249th Edition (Weekend)
Today is a bit of a special edition of our Weekly Prospero Newsletter - and in it, we'll address two very important subjects. At the end of the introduction, we discuss where our Net Options Sentiment for QQQ and SPY ended last week. In short, we are concerned and we'll explain why in a minute. But on a lighter note, we want to take this opportunity to let you know that Sunday was our CEO and Founder George Kailas's 40th Birthday!
This week, I (Matt), did something I've never done before in regard to the letter. Before each letter, George always builds out the structure and concepts – I just bring his vision to life. But when I found out it was his 40th birthday, I asked George if I and some of the Prospero team could take this opportunity to share with our readers what he's meant to us and the Prospero family. Why we decided to take the time to do this, has everything to do with the phrase I just wrote: "Prospero Family". We use those words VERY intentionally. Here at Prospero, we're big believers that in the cut-throat -every-man for himself- world of Wall Street, it's more important than ever that we build a company that’s founded on a culture of trust, integrity and honor. And while we won't do it every year, on this special occasion of his 40th birthday, we want to honor the man that's made all this possible! I asked some of the team to share what they appreciate about George and what they've learned in their time while working with him at Prospero. So whether you're a weekly reader, an app user, or an investor, please take the time to read the comments. Because what you hear us say about George is the DNA and culture that Prospero is built upon. And as you will see, we're in good hands and the future is bright! Check em out…
"One of the things that I appreciate most about George is the freedom he gives people to do their jobs. He's involved, but he trusts you to manage your own schedule. He expects the job to get done, but doesn't micromanage how you do it. That kind of trust is rare."
"I've always admired how he's able to look at both sides of any situation. He brings perspective that's rational, but open to others insight and reasoning, never overcommitting to one way of thinking"
"George, at heart, is a teacher and mentor. He's been in this business for over two decades, yet will take the time to talk to anyone, anytime, if they have a question. Who does that? His greatest joy seems to be helping everyday investors learn and thrive in this very difficult industry"
"George has the energy and focus of a founder. He has a unique talent for jumping in wherever his energy and focus is needed. Whether that's in big-picture strategy, connecting with people in the financial space or leading the charge in the finer, technical details of Prospero. George does whatever it takes to move our company forward"
I've worked in some very large organizations and have led at some pretty high levels and I am honestly blown away at George's leadership instincts for a man who just turned 40. The best way to put it – Wisdom. We all know that George is an innovator and a pioneer in the world of A.I, but here's what most people don't know. He has the wisdom of a leader much older than 40. For example, he listens to his team. He invites pushback, even when it's not his ideas. He's not afraid to admit when he's wrong. While he values experience in the world of finance and investment, he thinks outside the box when it comes to building a team. He looks for hustle, intelligence and potential over degrees and connections to "the system". He refuses to quit until we get it right. He fights for excellence. And maybe most importantly, he GENUINELY cares about every-single-solitary person that's involved with Prospero at any level. And I can say from experience, that is unfathomably rare in a leader of his capacity. Honestly, we could keep going and going, but all that to say, HAPPY BIRTHDAY GEORGE! So many of our lives are better because of your life and work! Thank you for who you are and what you mean to all of us!
Now let's get to the subject of what concerns us heading into the coming week. Last Friday something got our attention. Several times during the day the combined QQQ and SPY Net Options Sentiment scores hit ZERO. I personally check our QQQ and SPY Net Options numbers serveral times throughout most trading days and have for the last 3 years. I can't remember seeing the numbers flatline across the board at zero. At the end of day Friday the market closed with a combined score of 3. For context, the day before the correction started in March, the combined Net Options score was 3! That's concerning.
Now, it's imporant to note that in March, SPY Net Options had remained at 0 for a bit before the drop. That also happened before corrections in previous years. Currently, SPY NOS has stayed low, but has been bouncing around a lot under 10. This drop could simiply be a bit more dramatic swing of volatility based on some news event versus a correction. Additionally, over the weekend news outlets reported that a 3-judge panel from the United States Court of International Trade struck down President Trump's tariffs that had been issued under emergecy powers. It's unclear how the markets will react to the news, but while the U.S. market is closed for Labor Day, foreign markets like the German DAX, Japanese Nikkei 225 and Euro Stoxx 50 (which often signify U.S. futures’ direction) are open and are slightly green.
All that being said, we'd be remiss not to pay attention to a combined QQQ and SPY NOS Score that ended the trading week at 3! We added some shorts heading into close on Friday to protect our downside. (As a point of transparency and honesty if there is major weekend news we hold whatever is in our portfolio through market open) We will be monitering the situation closely at open tomorrow. If you are on X, be sure and give us a follow @Prospero_ai Besides the great market content we put out every day, we send out alerts if there is any major shifts in Net Options Sentiment. Hope you're having an amazing Labor Day–and now a word from the Birthday Boy himself!
A WORD FROM OUR CEO
Our Crowdfund is getting close to a big milestone, $200K! And we have 160 investors.
Since I didn’t contribute to the opening of this letter, this section will run a bit longer than usual. If you haven’t watched our ~5-minute videos, I’ve condensed some of my most important lessons into three core themes:
Why Options Flow Matters for Investors (Even if You Don’t Trade Options)
For a deeper dive, my Modern Warren Buffett talk with Finimize offers a longer-form perspective on how to apply value investing within today’s market frameworks.
Like Matt, I am concerned about low QQQ/SPY Net Options Sentiment but given how volatile especially QQQ was last week I won’t overreact to a bad Friday. When QQQ Net Options Sentiment spiked on Thursday, I went all in on some higher-risk longs, thinking we were about to see another leg in the strong “buy the dip” trend. But cracks are starting to show, and while I’m not calling the end of that market dynamic, I also don’t think it’s safe to assume it will continue at the same strength. For now, we won’t lean too aggressively long (or long-risk) or short until we see clearer signals—ideally, steadier sentiment numbers instead of the current volatility.
Getting caught in last week’s QQQ sentiment surge turned what started as a strong week into a tougher finish. Still, our paper trading portfolio continues to post excellent results this year, reinforcing the strength of our approach even through the swings. We are 63% above the market annualized with a win rate of 60% against SPY benchmarks.
Our short intro + learning videos get you up to speed on how best use our letters and app to increase your wins.
Special stream times — tomorrow. Tuesday the 2nd at 11 AM and Thursday the 4th at 3 PM.
Track all of your investments in real time with our app. Prospero’s proprietary AI tech updates key options signals like Net Options Sentiment, Upside and Downside every 3 minutes.
Reflections and Lessons
Market/Macro Update w/ Cap/ Value Analysis
QQQ and SPY Net Options Sentiment
Sector Analysis
How we view the Sector performance and momentum
Portfolio Strategy
Putting it all together to make a portfolio that first controls for risks but also has upside
Longs
Adds —> Keeps —> Drops
Shorts
Adds —> Keeps —> Drops
Portfolio Summary
CAP/VALUE ANALYSIS
A pretty flat week overall for everyone. Small and Mid-Cap growth faired slightly better than the rest but not by much. As we’ve noted in previous letters, there seems to be a broadening out into small caps in particular over the last series of months, and we’ll be picking up smaller cap names to ride that wave.
SECTOR ANALYSIS
Energy posted a strong rebound after a challenging couple of months, driven more by mean reversion than any fundamental shift. Meanwhile, Utilities and Consumer Defensive sectors underperformed, as investors rotated out of traditionally safer assets in favor of a more risk-on posture. That said, any resurgence in bearish sentiment could quickly reverse this momentum. Despite a relatively quiet week, Communication Services continues to lead as the top-performing sector year-to-date. Its resilience makes it a strategic anchor in our long book, providing stability amid shifting market dynamics.
SPY/QQQ NET OPTIONS SENTIMENT
SPY NOS seemed like it wanted to find a reason to rebound, but after inflation came in line expectations tempered and turned extremely bearish again, although that could change after the tariff ruling that happened after market close.
QQQ NOS had the same reaction that SPY did after the inflation print. Looks like the overall market regardless of sector is still trying to figure out and find reasons to be positive.
PORTFOLIO STRATEGY
QQQ NOS and SPY NOS are telling a similar story which is quite bearish at the moment. But as we said we do not want to overreact with the market paiting a very different picture on Thursday and Friday. So we’ll be responding accordingly in our positioning with more breadth than last week and appropriate diversification across the cap space. 7 longs, 9 shorts.
Long / Bull Moves
Long / Bull Moves – GOOG and ELV adds / FN, TSLA, PPTA, CRWV and LEU holds / CHTR, NVDA, U, LITE, GTLB and SOFI drops
Adds
GOOG was an easy add as it came in at the top of our screener. ELV was an opportunistic add with good Net Options and earnings power.
Holds
FN was kept for mid cap Tech exposure. TSLA was kept for its perfect Upside Breakout and great Net Options. LEU was kept for Energy exposure and great Net Options. PPTA was a good cap/sector diversification with strong numbers given those characteristics. CRWV was held with strong Net Options Sentiment but not on our screener due to some missing values as an IPO.
Drops
CHTR was dropped because it didn’t have any standout metrics. U and NVDA were dropped because we wanted to reduce our Tech exposure. LITE, GTLB and SOFI were all dropped as they were screened out.
Short / Bear Moves
Short / Bear Moves – TTEK, BNTX and EVTC adds / IHRT, ON, ARCC, DELL, IRBT and TSM holds / FYBR, K, MNTN, DIOD, VRRM, QSR and CNXC drops
Adds
TTEK was added for larger cap exposure with decent Downside Breakout. EVTC was added for Tech exposure with poor earnings power. BNTX was added as a counter-balance to ELV with great scores for a large cap.
Holds
IHRT was kept for its favorable Net Options. ARCC was kept for larger cap Financial Services exposure. ON, DELL, IRBT and TSM were all kept for their favorable Net Options Sentiment.
Drops
FYBR and MNTN were dropped to reduce Communication Services exposure. DIOD, VRRM, K, QSR and CNXC were all dropped as they were screened out this week.
Portfolio Summary
Long / Bull Moves – GOOG and ELV adds / FN, TSLA, PPTA, CRWV and LEU holds / CHTR, NVDA, U, LITE, GTLB and SOFI drops
Short / Bear Moves – TTEK, BNTX and EVTC adds / IHRT, ON, ARCC, DELL, IRBT and TSM holds / FYBR, MNTN, DIOD, VRRM, QSR and CNXC drops
7 Longs: GOOG, ELV, FN, PPTA, TSLA, LEU and CRWV
9 Shorts: TTEK, EVTC, IHRT, ARCC, ON, BNTX, DELL, IRBT and TSM
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