In this episode, we discuss:
- Volatility as an asset class of its own
- The journey of the VIX from its early days until now
- Analysing the relationship between the VIX and the S&P 500
- What’s known as volatility relative-value trading
- The usefulness of the VVIX
- Operating models during different market and economic environments
- Kurtosis and skew
- The need for Volatility strategies as part of a diversified investment portfolio
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Episode TimeStamps:
00:00 - Intro
02:05 - Why should somebody add volatility strategies into their portfolio?
04:48 - Do you consider Volatility to be an asset class of its own?
05:58 - What was it like during the early days of the VIX market?
08:28 - What is the VIX, and what is the calculation that goes into the VIX?
14:07 - Tell us a little bit about the relationship between the VIX and S&P 500
19:37 - How does volatility risk premium relate to other datasets you use?
25:03 - What is ‘volatility relative-value’ trading?
27:37 - How do you think about the ratio that you combine between the S&P 500 & the VIX?
30:31 - Is it true that if you see a spike in the VIX, you’ll look to take advantage via the front-month volatility in that spike?
33:29 - Do you think VVIX is a good measure for the volatility of volatility?
35:09 - How do you use options in a creative way in your portfolio?
37:22 - How do you identify and think about possible mispricings in the market?
40:40 - Do you try to track both the normal price and OTC prices?
42:00 - How do you approach building & running volatility models during different market environments?
47:22 - Describe what volatility traders experienced during the ‘volmaggedon’ of February 2018
55:06 - How did you trade through the ‘known risks’ 2020 election?
59:15 - How much can you rely on market history as a predictor for the future?
01:02:49 - Is it true you’re likely to experience long periods of flat to negative performance while waiting for those huge, profitable moves in volatility?
01:06:09 - How do you think about kurtosis and skew, and how they relate to other strategies?
01:08:56 - Do you view what you do as a necessary component of a large Trend Following firm?
