Trading Volatility

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@notsethbregman I didn't run a long vol fund. What I was describing was a long vol fund, who often have a mandate to operate in. Artemis is a good example of a fund with a smart PM but had to play the tail hedge game and ultimately fail. They are not unique.

This guy is down month after month and he doesn't think its his fault. Sharp as a cue ball Zero sense of self awareness. Don't speak about vol trading again with that mouth of yours

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@MrBDelany Easier to own protection when it is built into a balanced portfolio because your returns will more closely track the market benchmarks (e.g. $spx ). When hedging is done in a separate portfolio, the losses are very visible every month.

@TradeVolatility Was following you till the last sentence about embedded convexity being easier to underwrite Say more?

As a former PM who ran a long/short vol strategy, I’ll say the quiet part out loud so that aspiring PMs out there know: Long Vol / hedging funds are doomed to fail because you are asking allocators to pay a visible, recurring insurance premium for an invisible benefit. Long-vol funds sell convexity, but allocators judge linearly The experience is down month, down month, down month, down quarter, down year, hey we're up some, down month, down month, down month, wait why are you pulling money there is a vol spike coming. The better structure is a balanced portfolio with a clearly defined vol / convexity sleeve. Let the core portfolio compound. Let the convexity sleeve protect the left tail, create liquidity in stress, and fund rebalancing when assets get cheap. Standalone hedging is psychologically hard to own. Embedded convexity is much easier to underwrite.

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@BTCBeliever21 @BarbellFi

@BarbellFi You'll get inflated away and your house will be worth $4 Million in 30 years

The 30 year treasury yield is now 5.1% Convincing my wife to sell our house We’d net $800k after closing Dump all that into 30 year bonds Collect $40k/year for 30 years Use that money to pay rent Never deal with the lawn or a leaky roof And get my $800k back in 30 years 😳

You can invest in bonds for 30 years and have 3.4M Or invest in equities and have 14M.

@BarbellFi Bonds at 5% or equities at 10%. 🤔

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These trends say a lot. stocks.tradingvolatility.net/myDashboard

As a former PM who ran a long/short vol strategy, I’ll say the quiet part out loud: Long Vol / hedging funds are doomed to fail because you are asking allocators to pay a visible, recurring insurance premium for an invisible benefit. Long-vol funds sell convexity, but allocators judge linearly The experience is down month, down month, down month, down quarter, down year, hey we're up some, down month, down month, down month, wait why are you pulling money there is a vol spike coming. The better structure is a balanced portfolio with a clearly defined vol / convexity sleeve. Let the core portfolio compound. Let the convexity sleeve protect the left tail, create liquidity in stress, and fund rebalancing when assets get cheap. Standalone hedging is psychologically hard to own. Embedded convexity is much easier to underwrite.

There’s always a valuable lesson and a positive takeaway in every fund collapse. I’m no volatility expert, and I hope someone does a thorough autopsy of what happened, but here are my immediate takeaways: 1) Tail risk hedging is really, really hard. There’s a reason the classic 60/40 stock/bond portfolio remains the most popular allocation in the world: the 40% in bonds is still the simplest, most reliable positively asymmetric long-term hedge most investors can implement. It’s not perfect, but it’s “good enough” for the vast majority of people who just want durable diversification without needing to be geniuses. 2) Shorting (and short vol strategies) is also really, really hard. You’re fighting the long-term upward drift of markets, dealing with asymmetric payoffs that require big moves to pay off, and battling time decay plus carrying costs. What looks elegant on a backtest becomes brutally difficult in live markets. At the end of the day, the clearest lesson is this: investing is hard. You don't need to make it harder. If you decide to actively trade, time the market, or run sophisticated strategies, understand that you’re voluntarily making an already difficult game even tougher. You might capture more upside along the way, but the margin for error shrinks. I hope everyone finds some positivity in all of this.

Bonds still struggling. Neither $TLT nor $IEF can maintain its buy rating.

The same reflexivity creating this opportunity can also destroy the strategy once enough participants adapt to it.

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@BeckJD_ Indeed.

@TradeVolatility Actually this cycle it's TUES, May 19th ..

May $VIX futures expire next wednesday.

@Tony_Schultz_ That's a good question because it is not intuitive. It's consistent, for better or for worse, regardless of what the trend is. meaning : strong == strong going up improving == going up weakening == going down fading == strong going down

@TradeVolatility Is it correct to infer that "momentum fading" on something that is in a downtrend means downside momentum is fading?

Here's the round up on $SPX sectors + $VIX + $GLD + $USO Trend, momentum, extension, GEX, P/C balances, implied vol, realized vol. From Options Scanner. Repo at: github.com/jwolberg/optio…

$QQQ is +38% over the past year. Who here has a portfolio that is lagging that?

In case you forgot, all-time highs are bullish.