Alpha Exchange

In six short trading days from 4/2 to 4/9, the SPX realized as much vol as it did during the ENTIRE year of 2024. The protracted risk-off that began with the “Liberation Day” fallout ranks only behind Covid and the GFC in terms of severity using data going back to 1990. While we've likely moved past peak VIX, in the aftermath of recent chaos is an overhang of uncertainty that may hamper critical d...

For Matt King, evaluating market risk is often about pinpointing vulnerabilities within the financial system. Over the many years he's been advising institutional investors, he's gone where the action is - in the dotcom era it was corporate balance sheets, in the pre-GFC period it was asset-backed CP and in the last decade it's been sovereigns and QE.   Now the founder of Satori Insights, Matt sha...

Market risk events come in all shapes and sizes, originating from unique sources of uncertainty. We've seen them all - valuation bubble unwinds, mortgage credit crashes, Fed policy shocks, even the shutdown of the US economy from Covid. Over the last month, investors have been forced to confront a new risk, that of the imposition of substantial tariffs by the US on its trading partners. With this...

Lenin purportedly said, “There are decades where nothing happens; and there are weeks where decades happen.” It’s difficult to understate how highly consequential these past few days have been. We live in an interconnected world of international rivalries, debt, trade, asset prices and economies. All kinds of tail probabilities become more live when a shock of this magnitude occurs. From a market...

Best known for his seminal work on the information content of the US Treasury yield curve nearly 4 decades ago, Campbell Harvey has produced meaningful academic research in all corners of empirical finance. In this episode of the Alpha Exchange, I caught up with Campbell, now a Professor of Finance at Duke and Partner at Research Affiliates, on his recent work on gold, an asset near and dear to me...

In this discussion, I review the absolutely stunning level of volatility experienced by the S&P 500 right around this time 5 years ago, as the market crash resulting from the Covid shutdowns occurred. No asset – except volatility – can survive the liquidation that took place in March of 2020. I also focus on gold, which, to be clear and to repeat, is not a hedge. A hedge is an insurance contract t...

Now a Portfolio Manager at Acadian Asset Management, Owen Lamont has had a long career in both the markets and in academic research on them. Earning a PhD in Economics from MIT in the 1990’s and then teaching at the University of Chicago shortly thereafter, Owen makes the point that these two storied institutions approach empirical finance from vastly different perspectives, with the MIT approach...

“This is not your father’s ETF market” would be one statement used to highlight the ever-expanding product mix available to investors via exchange traded funds. Today’s suite of ETFs embeds derivatives, targets non-traditional assets like private credit and crypto and can offer daily resetting leverage as well. Add to this, efforts to deliver exposures to quantitative investment strategies via the...

My process is about seeking out some alpha through analyzing a broad spectrum of prices, specifically the one’s that imply some probability. I will repeat that it is the options market, not the stock market that is the best economist in the world. Option contracts carry the dimensions of time – the expiration – and distance – the strike price and the resulting prices help us gauge two important qu...

Recently, DeepSeek, tariffs and earnings news have caused large moves in some stocks but not others, leaving fluctuations at the equity index level relatively tame. Will this volatility moderating run of low correlation continue?  In this short podcast, I explore the recent history of extraordinary diversification in the US equity market along with the implications that may result. Is the market v...

It is said that death and taxes are the only two certainties in life. Add to these, the enormous growth of the ETF industry as a third irrefutable occurrence. Covering the landscape of exchange traded funds for Bloomberg is Eric Balchunas, a man steeped in the most plain vanilla of products like the SPY to the newest flavors of underlying exposures and payout constructions which he calls “hot sauc...

Since 2018, Dean Curnutt has been hosting discussions with market professionals, focused on topics such as portfolio construction, hedging, monetary policy and the impact of financial products on markets.  Central to these conversations has been the exploration of an expert’s risk framework and how he or she goes about looking for opportunities. A little more than 6 years after its launch, the Alp...

Good listeners welcome to 2025 and at the risk of offending Larry David and violating his strict 3 day statute of limitations, I gotta wish you a Happy New Year. The subject at hand is diversification. What composition of assets yields a favorable return with bearable drawdowns? After two straight years of 25+ percent returns on the SPX with just 13 vol, portfolio construction might be considered...

The subject at hand in this discussion is the unbelievable launch of options on IBIT, the bitcoin ETF. What I’d like to put forth is that the financial characteristics of the underlying asset – bitcoin - pave the way for IBIT options, already off to an amazing start, to become a critical industry risk management tool. The unique risk characteristics of bitcoin and how they shape the option vol sur...

The “flow desk” as it’s often called on the sell-side is about repeatability and scale in the service of institutional clients. It’s a competitive business with not a lot of margin for error, especially in a product like equity options where being on the wrong side of a misbehaving Greek could spell trouble. With this in mind, it was great to welcome Ali Samadi, Head of Flow Equity Derivative Sale...

A major theme of Alpha Exchange podcasts over the years has been the impact that financial products that live and breathe within the markets have on asset clearing prices. Events like the crash of 1987, the GFC, the 2018 XIV event or the unwind of short variance exposure in March 2020 come to mind as examples. More recently, the substantial growth of leveraged ETF products has gotten a lot of atte...

What follows are some of my recent thoughts on a favorite topic: the interaction between option prices and the assets upon which these options are written. Specifically, I share thoughts on price / vol spirals, which come in two flavors:  a) the asset plummets and vol explodes  b) the asset surges and vol explodes. In the first, which we might call "Melt Down", the asset nears a bankruptcy cliff a...

It was a pleasure to welcome Victor Haghani, the Founder and CIO of Elm Wealth Management back to the Alpha Exchange for an engaging discussion on those turbo-charged financial products called leveraged ETFs. Our conversation is focused on the large product suite built around MicroStrategy, a software company whose mission appears to be solely focused on the accumulation of bitcoin. Itself a stock...

Welcome back to the last installment of “20 Things to Do Before You Ask for a Price”.  This 4-part series has been geared towards illustrating how the equity derivative salestrader can be a meaningful part of getting two institutional counterparties to “yes” with respect to the transfer of option risk. The salestrader, sitting between the trader and the client, can quarterback the process by appre...

It was a pleasure to welcome Rocky Fishman, Founder and CEO of derivatives advisory firm Asym 500 back to the Alpha Exchange. An area of specialty for Rocky is evaluating systematic trading strategies, like vol targeting, that live and breathe within equity markets and potentially sponsor feedback loops. The focus of our discussion, the growing universe of leveraged ETFs, a unique product set that...

Welcome to Part 3 of “20 Things to do Before You Ask for a Price”. To review, “20 Things” is a to-do list I developed more than 2 decades ago while running a derivative sales team. The desk committed a substantial amount of capital in pursuit of business, which made it easy to win trades but also easy to lose money in the process of winning those trades.  20 Things was about playing defense and of...

While the SPX has enjoyed a banner year in 2024, a series of risk events have mattered, including the August 5th spike in the VIX and option pricing uncertainty into the US election. Credit spreads have generally behaved in benign fashion, however. What will 2025 bring for the world of credit and what risks should we pay attention to? With this in mind, it was a pleasure to welcome Dominique Toubl...

We are back, with installment number 2 of “20 Things to Do Before You Ask for a Price”. It’s a to-do list for the equity derivatives salestrader who chooses to be a relevant and constructive part of the option risk transfer process that a buy-side client and sell-side trader engage in. Small trades – like buying a pack of gum – can be consummated quickly. Large trades – like buying a house – typic...

I wanted to welcome you all to a new, 4-part series of the Alpha Exchange, “ Twenty Things to Do Before You Ask for a Price ”.  In short, this is my thinking on what a derivatives salesperson ought to do instinctively and nearly instantaneously in his or her interaction with a trader colleague being asked to price option risk for a client. These 20 things constitute a real time to do list for the...

A resounding Trump win. A collapse in vol. Bitcoin “number go up”. And up. And up. The French Whale on Polymarket got paid. A star was born in Scott Jennings. The Fed eased. And, Powell, in the words of DiCaprio in Wolf of Wall Street said, “I ain’t f’n leaving”.  That’s the summary. But there’s lots more to explore and in this short pod I aim to provide you with some food for thought on the risk...