🔑 Key Topics Covered:
How long volatility strategies work and their role in investment portfolios
Behind-the-scenes look at managing vol strategies during market crashes
The August 2023 volatility event and what really happened
Evolution of the derivatives market and its impact on trading
The truth about market liquidity and short volatility positioning
How retail options trading has changed market dynamics
Kris provides a fascinating glimpse into how vol traders operate during market stress events, explaining how these strategies aim to deliver explosive returns during market crashes while minimizing losses during normal conditions. He also discusses the psychological challenges of running these strategies and the importance of having both quantitative and discretionary elements in volatility trading.
Whether you're an institutional investor, retail trader, or just interested in understanding market dynamics better, this episode offers valuable perspectives on an often misunderstood corner of the investment world.
00:00 Introduction and Overview
02:14 What it's like running a long vol strategy during market crashes
03:29 The psychology of trading during market stress
04:43 "The Super Bowl" - When volatility traders make their money
06:23 Having a plan for market stress events
07:34 Understanding tail risk and long volatility funds
09:20 How these strategies actually make money (repricing of risk explained)
11:26 How to limit losses between major events
15:29 The CalPERS story - Real world example of hedging fatigue
20:14 Why these strategies can't work as ETFs
23:21 The real value of tail risk hedging in portfolios
31:57 Behind the scenes of August 2023's VIX spike to 60
37:05 Impact of zero DTE options on market structure
39:14 The current state of short volatility trades
44:29 Avoiding the perma-bear trap
46:17 How derivatives create forced buyers and sellers
54:19 How hedge funds are using options differently now
57:25 Understanding dispersion trading and market size
1:02:14 Key lesson for average investors
1:04:08 Current market risks and broker intervention
Follow our guests:
Kris Sidial: @KSIDIII
Brent Kochuba: @spotgamma
#investing #trading #volatility #finance #markets #options #riskmanagement
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