Teach Me Like I'm Five: Investing Concepts Made Simple

In this episode of Teach Me Like I'm Five, Matt Zeigler sits down with Matt Reustle of Business Breakdowns to unpack how great businesses actually work, why pattern recognition matters more than stock picking, and what investors can learn from studying the economics, value chains, and management decisions behind the world’s most durable companies. This conversation breaks down how to analyze a company from first principles, what separates good businesses from great ones, and the recurring traits shared by long-term compounders. If you want to improve your investment process, understand business models, or learn how elite analysts think, this episode delivers a masterclass in fundamental analysis and business pattern recognition.Topics covered:• How to start analyzing any business from scratch• Understanding revenue models, value chains, and industry economics• The difference between transactional and recurring revenue• Why aftermarket services can be more profitable than product sales• How cash flows through an industry and who captures the value• Examples of hidden compounders in everyday industries• What business breakdowns reveal about macro environments• How investors should think about secular tailwinds vs GDP-level growth• The three traits shared by exceptional companies• The critical role of management teams and financial hygiene• Capital allocation lessons from top operators• Why durable tech growth is so hard to evaluate• How intangibles shape competitive advantage• What Amazon, Robinhood, and other companies teach about evolution• The hidden business value inside SpaceX and Starlink• Whether overall business quality has structurally improved• Why pattern recognition is more valuable than gut instinct• The single most important question to answer when analyzing a companyTimestamps:00:00 Understanding what drives repeat sales00:09 How businesses really make money01:09 Opening and guest intro02:00 How to begin researching a complex company04:49 Using investor presentations and sleuthing for insights05:12 Non-obvious revenue drivers in major industries06:20 What to look for in early discovery07:00 Mapping value chains and cash flow dynamics08:46 Who captures value in industries like oil and gas10:20 What 150+ business breakdowns reveal10:48 Surprising hidden compounders12:28 Lessons about industry cycles and secular growth14:52 How to think about next steps after understanding a business17:34 Pattern recognition in investing18:00 How much work it really takes to understand a company19:00 What rigorous analysis teaches you20:44 Traits that separate great companies21:24 Self-reinforcing sales models23:00 Financial hygiene and cash economics25:15 Adaptability as a core business superpower25:44 How these insights evolved over time27:31 Evaluating management teams29:42 Capital allocation as a defining skill32:02 How tech companies evolve and compete34:15 What makes durable tech growth difficult to judge36:11 Understanding intangibles and company DNA38:16 The difference between real and exaggerated narratives41:04 How companies like Amazon repeatedly reinvent segments42:14 Why some companies survive major failures44:24 Breaking down Apollo’s complex business47:00 Lessons from Home Depot52:00 What GE teaches about cycles and capital allocation55:27 How to understand SpaceX as a real business58:28 Has overall business quality structurally improved?01:02:00 Why pattern recognition matters more than stock picking01:04:33 Missteps and lessons01:06:00 The single most important metric to identify01:07:00 Where to find Matt Reustle online

In this episode of Excess Returns, Matt Zeigler sits down with Kris Abdelmessih and Matt Cashman to break down one of the most important — and often misunderstood — concepts in options: gamma. They explore what gamma really is, how it interacts with delta and theta, why gamma scalping (a.k.a. delta hedging) matters, and what both individual traders and professionals need to know about it. If you’ve ever wondered how options traders actually make money from volatility, this is your guide.Topics CoveredWhy understanding gamma is critical to options tradingThe relationship between gamma, delta, and thetaUsing physics and middle school math to explain gamma’s roleHow gamma P&L works and why it creates curvature in returnsWhere gamma “lives” (at-the-money vs. in/out of the money, short vs. long dated)The mechanics of gamma scalping and delta hedgingWhy option trading is really volatility tradingThe practical applications for retail traders and professionalsCommon misconceptions about “income from options”Timestamps00:00 – Why gamma matters in options trading02:22 – Defining gamma and its sensitivity to price moves05:04 – Practical explanation: delta vs. gamma09:00 – Physics/acceleration analogy for gamma P&L18:00 – Mapping acceleration math to options gamma23:30 – Where gamma lives: at-the-money and near-expiry options29:00 – Introduction to gamma scalping (delta hedging)36:00 – When gamma trading works best (volatility path dependence)41:00 – Real-world applications for individuals and professionals47:14 – Why selling options isn’t “guaranteed income”

What can bar bets, coin flips, and the length of your subway commute teach us about options pricing? In this episode of Excess Returns, Matt Ziegler is joined once again by Kris Abdelmessih to break down complex options theory into intuitive, real-world analogies. From prediction markets to probability distributions, Kris helps us understand how the options market reveals what the stock market often hides—how investors are pricing not just if something happens, but how much it matters when it does. This is options math with a twist, taught like you’re five, but ready for Wall Street.📈 Whether you're an investor trying to size a high-risk, high-reward position, or simply curious about how the market “thinks” about uncertainty, this episode is full of mental models you’ll want to revisit.📌 Topics Covered:Coin flips vs. futures: the two dominant styles of bettingOver/under bets and what they teach us about prediction marketsWhy odds ≠ probabilities—and how to convert between themThe difference between probability and magnitude in financial outcomesBar bets and beer-drinking contests on Wall Street (!?)Using call spreads to isolate probabilities, not potential profitsA visual breakdown of skewed vs. symmetric return distributionsWhy two stocks can have the same price but completely different implicationsHow the options market understood the dot-com bust better than most investorsWhy thinking in bets makes you a better investor and allocator⏱️ Timestamps:00:00 – The stock market vs. the options market01:42 – Over/under bets and their connection to options05:59 – Understanding prediction markets and odds10:00 – Future-style bets: Magnitude vs. probability14:35 – The subway commute example and tail risk19:00 – Why volatility and skew matter in pricing20:38 – Stock A vs. Stock B: Same price, different outcomes24:00 – Visualizing probability distributions28:00 – How call values reflect both vol and probability32:00 – Truncating the tail: turning options into “bar bets”35:00 – Using call spreads to extract implied probabilities37:00 – What investors can learn from this framework39:00 – Options markets during the dot-com bubble40:45 – Where to follow Kris online🎙️ Guest: Kris Abdelmessih🧠 Follow Kris’s work: https://moontower.substack.com

Brent Kochuba, Founder of SpotGamma, specializes in options market analysis and dealer hedging flows. He reveals how hidden options flows can reshape stock prices. The discussion covers gamma squeezes, Vanna, and Charm, explaining their impacts on market behavior. Brent illustrates how implied volatility triggers powerful market moves, especially around expiration dates. Real-world examples like GameStop and Tesla highlight these dynamics, emphasizing why understanding options is crucial for both traders and investors.

Kris Abdelmessih, an options expert and founder of Moontower AI, unravels the intricate world of put-call parity with engaging Lego analogies. He shows how options can replicate stock payoffs, making complex strategies accessible. Kris explains synthetic positions, using creative visuals to illustrate the concept. The discussion includes the mechanics behind covered calls and how professional traders leverage options pricing for insights. It's a playful exploration of options trading that empowers both beginners and seasoned investors.

Matt Cashman, Principal of Investor Education at the OCC, breaks down the often-misunderstood Rule of 16, simplifying how traders can interpret market volatility. He explains its significance in turning annualized volatility into actionable daily insights. The discussion covers the psychological impacts of market surprises and how traders adjust their strategies. With real-world examples, Cashman illustrates the importance of understanding volatility for better risk management and informed trading decisions.