Phase Space AI

Trade Construction

ServiceTitan [TTAN]

ServiceTitan [TTAN] — Trade Construction & Risk Management

As of 2026-07-29 · spot $78.40 (2026-07-28 close) · framework v1.5.1 No position verdict is issued here. This document specifies how a position would be expressed and risk- managed if the book chose to take one, and states explicitly which vehicles are uninvestable.

1. Liquidity Criteria — BINDING

1.1 Common stock: PASS, comfortably

Window ADV (shares) ADV ($)
20 days 1,345,869 $102.7m
60 days 1,604,602 $112.4m
252 days 1,274,113 $105.7m

Source: Alpaca consolidated daily bars, 2024-12-12 → 2026-07-28.

~$105m of daily traded value. A $25m position is 0.24 days of volume — fillable inside a morning at negligible impact. A $100m position is ~1 day. Liquidity is not a constraint on this name at any size this book would take. Free float is 82.7m Class A shares (86.7% of total) — Class B is founder-held and does not trade.

1.2 Options: chain pulled, and the answer is DO NOT USE

Per criteria.md, no options structure may be proposed without the actual chain. It was pulled (Alpaca v2/options/contracts + v1beta1/options/snapshots, 2026-07-29). Full call chain, $70–130 strikes:

Expiry Strike OI Bid Ask Spread as % of mid IV Delta
2026-10-16 70 199 14.53 17.53 18.7% 0.636 0.752
2026-10-16 75 38 12.02 14.60 19.4% 0.656 0.672
2026-10-16 80 2,009 9.19 11.88 25.5% 0.641 0.592
2026-10-16 85 237 7.78 9.60 20.9% 0.661 0.514
2026-10-16 90 409 5.06 7.85 43.2% 0.630 0.432
2026-10-16 95 335 3.52 6.35 57.4% 0.624 0.358
2026-10-16 100 283 2.47 4.84 64.8% 0.613 0.290
2027-01-15 70 143 19.65 22.16 12.0% 0.679 0.724
2027-01-15 75 263 16.99 19.32 12.8% 0.669 0.672
2027-01-15 80 163 14.04 16.69 17.2% 0.646 0.617
2027-01-15 85 36 12.16 14.98 20.7% 0.657 0.566
2027-01-15 90 176 10.41 13.05 22.5% 0.655 0.515
2027-01-15 95 92 8.86 11.43 25.3% 0.654 0.466
2027-01-15 100 317 7.76 10.06 25.8% 0.660 0.423
2027-01-15 110 78 4.64 7.55 47.7% 0.631 0.329
2027-01-15 120 254 3.03 5.94 64.9% 0.631 0.259
2027-01-15 130 30 2.07 4.84 80.2% 0.641 0.209

Total OI across the scanned calls: 5,340. Maximum single-contract OI: 2,009 (Oct-16 $80).

Three independent reasons options are the wrong vehicle here:

  1. Implied vol is rich against realised. IV clusters at 0.61–0.68 against a 54.1% 252-day realised vol. IV/RV ≈ 1.20. Buying premium here means paying a 20% variance premium to express a directional view — on a thesis (§ Valuation) whose margin is +2 to +5pp. The edge does not survive the carry.
  2. Spreads are prohibitive. The tightest contract in the entire chain is the Jan-27 $70 call at 12.0% of mid. The at-the-money contracts are 20–26%. A defined-risk spread pays that twice. Round-tripping a position costs 25–50% of the premium before the underlying moves.
  3. No expiry reaches the horizon. The furthest listed expiry is 2027-01-15, 5.6 months out. A 12-month thesis cannot be expressed without a roll, and the roll is charged at the spreads above. There are no LEAPS.

Options verdict: UNINVESTABLE for this thesis. Express in common stock.

This is the HCA test applied and answered. The chain exists and quotes size (bid sizes 59–629), so it is not a dead chain — it is a rich and wide chain, which is a different failure and a more expensive one.

2. Vehicle and structure

Vehicle: TTAN common stock (Class A, NASDAQ).

Entry. Momentum Criteria is NEGATIVE (12-1 = −33.6%, 28th percentile of range), and Momentum governs when, never whether. The correct expression of a negative-momentum, thin-margin PASS is scaled entry against dated evidence, not a single fill:

Tranche Size Trigger
1 40% of target On decision. Establishes the position.
2 35% Q2 FY27 print (~2026-09-04, estimated) — released only if GTV growth ≥ 20% and an absolute Max location count or ARR contribution is disclosed.
3 25% Q3 FY27 print (~2026-12-03, estimated) — released only if the FY27 guide walks up again, maintaining the 6-for-6 pattern.

Rationale: the thesis has one genuinely unresolved variable (the company-controlled growth residual, §Research §2) and one dated event that resolves it. Paying full size before that event is paying for information you can buy 5 weeks later.

No entry limit price is set. The band in §Valuation 4.2 spans −15% to +22% conditional on a multiple that is declared unidentified; a limit price derived from an unidentified anchor would be false precision.

3. Sizing

Inverse-volatility sizing is the active protection (criteria.md, Downside Criteria interim control), and it does real work here: TTAN's 54.1% realised vol is roughly 2x a typical large-cap and the sizing falls accordingly.

Input Value
Realised vol (252d, annualised) 54.1%
Implied vol (ATM, Oct-26 / Jan-27) 0.61–0.68
Beta not estimated — 1.31 years of post-IPO history spanning a de-rating regime; any beta from this sample is unidentified for the same reason the multiple anchor is

Recommended sizing: at or below the inverse-vol allocation, with a hard cap at half the book's standard single-name maximum. Three reasons to size below what inverse-vol alone would allow:

  1. The valuation margin is +2 to +5pp, not +18.9pp. It is a PASS, not a wide one.
  2. The exit multiple is MEDIUM confidence (unverified comparator share counts, §Valuation 1.3).
  3. The dominant risk factor is not idiosyncratic. ~80–90% of revenue growth is customer GTV, i.e. US residential-services spend. This position correlates with housing and consumer-discretionary exposure elsewhere in the book, not with software exposure. It must be aggregated against that factor, not against the tech sleeve, or the book will believe it is diversified when it is not. This is the single most important input this memo gives the portfolio layer.

4. Exits and invalidation

4.1 Thesis-invalidation exits — these are the real risk controls

Each is a specific, observable, dated disclosure. Any one triggers a full exit review, not a trim.

# Trigger Where observed Why it kills the thesis
I1 GTV growth prints below 15% in any quarter quarterly 8-K Ex-99.1 headline table GTV is the mechanism. Revenue follows within ~2 quarters. The +4.3pp valuation margin requires ~20% revenue growth, unreachable on sub-15% GTV.
I2 NRR prints at "110%" rather than ">110%", or the disclosure is withdrawn 10-Q MD&A The censored floor breaking. By the time this is visible the deterioration is several quarters old (Research §4.5). Withdrawal of the metric is equally disqualifying — that is the Twist pattern.
I3 GDR prints below 95% 10-K Churn breaking in an SMB base. Leading indicator of a downturn hitting customers.
I4 A guided quarter misses, breaking the 6-for-6 record 8-K Ex-99.1 The entire near-term estimate build (§Valuation 3) rests on this pattern. One miss and the house FY27 number of $1,190m is unsupported and the required-path margin goes to roughly zero.
I5 Cash R&D growth exceeds revenue growth for two consecutive quarters 10-Q, R&D less SBC in R&D The terminal margin of 20% assumes R&D normalises to 20% of revenue. It is at 32.7% and rising on a GAAP basis. Two quarters of cash R&D outgrowing revenue means the agentic build is structural, terminal margin is ~16%, and the sign of the valuation answer flips (§Valuation 1.4).
I6 Usage take rate on GTV declines for two consecutive quarters derived: usage revenue ÷ GTV, both disclosed quarterly The only observable proxy for payments-attach economics. Currently 0.254% → 0.260% → 0.270%. A decline means either processor economics compressing or customers routing volume off-platform.

Note what is deliberately absent: a stop-loss on price. Volatility is not the risk; permanent impairment is. A 54%-vol name will draw down 25% without any thesis change, and a price stop on this vol would exit on noise. The book's drawdown ladder and de-grossing protocol handle portfolio-level risk; the six triggers above handle name-level risk. I5 and I6 are the two that would not appear on any screen and are the reason this memo exists.

4.2 Valuation exit

Exit on multiple, not on price target. Because the 12-month anchor is unidentified, the correct exit rule is expressed in the same units as the entry logic:

Both thresholds must be recomputed with the verified share count (95.4m and growing ~5%/yr), not taken from any screen.

4.3 The $140 boundary

Above a $140 VWAP, 6,483,088 Co-Founder RSUs vest (+6.8% shares). Any valuation work done above that level must use ~101.9m shares plus organic dilution. A monitoring rule: if the stock approaches $130, re-run the target on the diluted count before adding.

5. What would make this a larger position

Stated so the book knows what to watch for rather than re-underwriting from scratch:

  1. An absolute Max location count or ARR contribution at the Q2 FY27 print. This is the only disclosure that converts the company-controlled growth residual (+2.0pp in Q1 FY27) from a residual into a driver. If Max is material, the exit multiple argument strengthens and the terminal margin gets a second source of support.
  2. Cash R&D decelerating below 15% while revenue holds above 22% — direct evidence the 20% terminal margin is reachable, which is the parameter the whole answer turns on.
  3. A seventh consecutive guidance beat — takes the pattern from "policy" to "structural," and the house FY27 estimate from a variant to a baseline.
  4. Retrievable Street consensus. Consensus Criteria is currently INDETERMINATE. If the house $1,190m sits materially above Street, the variant is real and dated; if Street is already there, the +4.3pp margin is consensus and the position is a beta trade on residential services.

6. What would make this uninvestable

  1. Any of I1–I6 firing.
  2. A verified exit-multiple rebuild that lands below ~19.0x EV/EBIT — the level at which the required CAGR equals demonstrated (§Valuation 1.5) and the margin goes to zero.
  3. A terminal-margin case that cannot clear ~17%. At 16% the margin is −1.2pp and the Valuation Criteria FAILS. This is a 4pp question and it is not settled by anything in the current disclosure.