BONUS: Cem Karsan - Derivatives Are The Underlying

Cem Karsan stops by The Business Brew to discuss the lens he views markets through. Cem's viewpoint is unique compared to many guests on this program because he looks at how options dealers are positioned and considers what flows may result from that positioning. Many guests on this show view equity valuation as the present value of the discounted cash flows available to equity. While Cem would likely agree with that, he argues in this episode that an equity's valuation is really an output derived from the options market (which expresses probabilistic views of discounted cash flows). We hope this episode gives you something to think about!
Cem is the Founder and Senior Managing Partner of KAI Volatility Advisors. He is responsible for firm-wide management, as well as its Head of Research and Risk Management. Cem triple majored in Economics, Policy Studies and English at Rice University and holds an MBA from Northwestern University’s Kellogg School of Management.
Follow Cem on Twitter: / jam_croissant
Learn more about Kai Volatility Advisors: www.kaivolatility.com/
This episode is brought to you by Bastiat Partners, a boutique investment banking firm. See bastiatpartners.com/. Detailed show notes below.
Album art photo taken by Mike Ando. Please see www.mikeando.com.
Thank you to @mathewpassy (on Twitter) for the show production.
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Detailed Show Notes:
Open - Cem’s background
7:25 - How Cem thinks about what matters to capital markets
13:10 - Valuations have no predictive value, short term
14:10 - What happened in 2017 and why did the market seem to go up every day?
21:40 - The counterintuitive conclusion of buying and selling volatility
23:10 - Why equities are derivatives of “derivatives”
27:10 - Why options are potentially better instruments for expressing a view
32:45 - Gamma squeezes explained
38:25 - Cem’s thoughts on where we are from a macro perspective
46:10 - The wealth gap and why
49:40 - Why we may be in a fundamentally inflationary environment
54:50 - The impacts of monetary policy and which generations have been hurt and helped by policy
1:00:40 - Why some medicine today may end up better in the long run
1:02:10 - The tension between utopia and the current (efficient) system
1:06:40 - Evolution and iteration will hopefully lead to better incomes
1:10:55 - The coming risks may come from exported inflation to emerging markets
1:13:10 - The winners of tomorrow used easy money to plant seeds over the past years
1:15:10 - More background on Cem

[@jinwingbu4717]

Truly well done, Bill. I literally watched this episode 5x and learned something new each time. Thanks for the great questions and the conversation.

[@cjall802]

Cem always generous with his time and emojis. Great stuff

[@Matt-ky8re]

Cem will be widely known in the next few years. Guy is a technician's technician. P.S. sound quality needs tampering

[@mooshoomastakilla]

Agreed

[@rajrsa]

Good discussion.
My thing about options is that it is basically about timing the market and you have to be right about the trade within that time frame.
Mr. Market can mess everything up for me. If I own a piece of a business, I don't need to worry about volatility as much.
I still sell cash covered puts and covered calls to get some extra profits.

[@nikhilrodye8226]

Great insights

[@YasinNabi]

This is one of the best videos I have watched today, thanks for the share :) a fellow creator,,,

[@nikhilrodye8226]

Sound quality?

[@gavinkalikapersaud7225]

the audio quality is not great. sorry cem

[@dedysetiadi2851]

Cem, ill buy you a new mic bro