VOL06: Finding True Value in the World of Volatility ft. Benn Eifert
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 712 Ratings
🗓️ 5 January 2022
⏱️ 69 minutes
🧾️ Download transcript
Summary
On today’s episode, Hari Krishnan is joined today by Benn Eifert, to discuss running a volatility fund, the benefits that Benn gets from using Twitter, how to effectively serve clients as a volatility trader, the drawbacks of hedging via ETFs, monitoring market flows, the popularity of short-dated options, implied volatility versus realised volatility, how correlations change over time, balancing family-life with managing a fund, and the new normalisation of working from home.
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In this episode, we discuss:
- A behind the scenes look at running a volatility fund
- How to use Twitter as an investor
- Bringing value to clients as a volatility trader
- Hedging via ETFs
- Market flows
- Options
- Implied volatility
- Finding a good work & life balance
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Episode TimeStamps:
00:00 - Intro
02:20 - How did you end up running a Volatility fund?
06:39 - Why did you join a Vol fund instead of a Global Macro fund?
09:30 - What do you gain from being on Twitter?
11:50 - Explain some of the methods behind how you serve your clients
16:19 - What are some of the weaknesses of hedging via ETF products?
19:44 - Do you find a lot of value in monitoring the flows into various markets?
23:34 - Why is it people are so eager to sell shorter-dated options?
26:17 - How do you counter the argument that it’s a good idea to write calls against short positions?
30:05 - What are some of the issues with looking at implied volatility versus realised volatility?
33:13 - What challenges do you face as a Volatility pro, when it comes to the extreme moves up and down?
37:37 - What do you do when you expect large volatility but the direction is unknown?
40:30 - How would you react if you knew that there was a huge amount of open interest, 5% down in the S&P, with a few weeks to go?
42:52 - Do you have any thoughts on the recent dislocation between the VIX and the S&P 500?
46:04 - What are the changes in dispersion dynamics and implied correlations that you’ve noticed over the years?
55:03 - Is it fair to say that if you’re long enough Volatility, and there’s a large enough systemic shock, then you’re going to make money?
56:48 - Do you have anything to say about the 10-year note futures options surface? Are there persistent distortions there?
59:25 - If you see a distortion in the skew, how do you approach it?
01:02:56 - Balancing family life and managing a fund
01:05:12 - The recent legitimisation of working from home
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Transcript
Click on a timestamp to play from that location
| 0:00.0 | I think you always have to keep in mind anytime there's a story for why something is a good trade that doesn't have any component of what the price of the trade is, you've got to have some questions, right? |
| 0:18.0 | So let's suppose that I thought it was a good idea to |
| 0:22.1 | be a buyer of a stock 5% lower. And so I sold a put for some very small, for a penny. |
| 0:31.3 | Well, you're still, that put will make you a buyer of that stock down there, but you're only, |
| 0:36.3 | but you're giving up all the potential upside of the |
| 0:39.3 | stock relative to owning it now in exchange for only having downside, right? |
| 0:44.3 | So clearly something's wrong. You wouldn't sell that put for free or for an infinitesimal |
| 0:48.3 | amount of money. The question is, are you getting paid enough to sell that put to justify the risk of loss if the stock was to move down a lot? |
| 1:00.3 | For me, the best part of my podcasting journey has been the opportunity to speak to a huge range of extraordinary investors from all around the world. |
| 1:08.8 | In this series, I've invited one of them, who also happens to be a long-time friend, namely |
| 1:13.4 | Harry Kristlin, to host a series of in-depth conversation on the topics of volatility, risk |
| 1:19.4 | and portfolio protection. |
| 1:21.5 | In today's world, portfolio construction is fast moving to the top of the agenda of many |
| 1:26.3 | investors as they try to analyze and |
| 1:28.3 | understand the riskiness of their portfolio. With ever increasing uncertainty around |
| 1:33.3 | the globe, knowing if you are essentially long or short volatility in your portfolio |
| 1:38.0 | can mean the difference between ruin and survival when the next crisis emerge. |
| 1:43.4 | The aim of these conversations is to try and understand the experiences |
| 1:47.3 | that have influenced these highly specialized market participants |
| 1:51.2 | and the processes they follow to harness their returns |
| 1:54.5 | so that we can all become better informed investors. |
| 1:57.7 | And with that, please welcome Harry Kristin. |
... |
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