Guess what! The FED now only allows booms. Any sign of a bust and they print more money. I just don't know how long that'll last. The markets have been showing wekness so frequently, I think the FED will run out of ink for the printers (inflation, lack of confidence in dollar followed by a flight for quality and so on).
So there are no answers from the channel, but I'll ask here anyway: he does his magic by buying OTM puts somewhat close to expiration in huge amounts, right? David Dredge never makes it clear what he does. I wonder why... 🤔 (EDIT: that -OTM puts- and leverage on an index futures contract)
I got this answer from David Dredge for you: "I also note the couple of older queries from Sami that you may just want to refer him to our website and the monthly Updates convex-strategies.com/blog/ and in particular the August 2019 and October 2019 Updates in terms of the examples we referenced on the compounding impacts of convexity. “Guilherme, the point of the video was to discuss the compounding benefits of constructing portfolios with greater positive convexity. As I say in the video - “it is just math” - the point being that participating in the upside, while cutting off the downside, of the best and worst performing markets, is the key to geometric compounding. The specifics of what pure hedging strategies managers like ourselves actually do will vary from manager to manager. We refer to ourselves as “Value Investors in Volatility”. We own volatility across the entire spectrum of volatility products available in the market, and across any and all asset classes, where supply and demand dynamics make that volatility attractive value. Our portfolio consists of predominantly longer dated volatility products, from vanilla options to more complex variance and convexity products, all targeted for the value that they offer in terms of cost vs asymmetry in a given level of market dislocation/volatility/correlation event. We are an “always on” portfolio protection product for our investors, so that they can confidently, and cost efficiently, take more of the risk that will benefit in the upside of markets. We don’t time, or have a view on, markets. We simply play goalkeeper. The reason I don’t discuss specifics of what we do in the video, or in any public forum for that matter, is that we don’t publically market the fund, but rather only engage in marketing discussions on a reverse inquiry basis after screening the potential investor for suitability. The point of the video was to merely broadly educate that there are better ways to construct portfolios and grow compounded returns than the consensus 60/40 balanced portfolio concept.”
OpalesqueTV thank you very much for kindly answering, and a big thanks to Dave also. Most of us are people with no expectations of investing in your fund simply because we don't have the means to (either because we don't have the volume, or because we don't have access to it for any other reason). Having an idea of what we can do to "bend the convexity" on our portfolios would be extremely helpful for us mortals, but I understand it's just not possible to share the mechanics so the whole internet can know about it. I will keep researching on what I can do myself to compound my portfolio in the long run, and I'm glad you guys took the time to share some information with us.
A big fund cant simply buy puts for protection, there is no liquidity. They rely on OTC deals creativity. Closer to expiration puts lose their value very fast and dont have enough vega, makes no sense in carrying it beyond 30DTE.
Excellent question ...i can understand that David cannot leak strategy .. IMHO however , buying OTM close to DTE may not be cost efficient ...could you find any backtests or some experience with the strategy ?
@@felipefigueiralima7748 There is plenty of liquidity in SPX for a big fund to buy lots of OTM puts to help provide the tail risk protection they need in order to commit a greater proportion of their investment capital into equities.
Sorry another issue , how the clients of your guest being advised when it comes to gamma risk / trap while they are taking long vol positions via puts and calls ? Or this is only relevant to guys on the short side of the volatility book and at what expirations such risk become more significant? Your answer is highly appreciated Your input
Sami I am posting David's reply here for you as well: "I also note the couple of older queries from Sami that you may just want to refer him to our website and the monthly Updates convex-strategies.com/blog/ and in particular the August 2019 and October 2019 Updates in terms of the examples we referenced on the compounding impacts of convexity. Guilherme, the point of the video was to discuss the compounding benefits of constructing portfolios with greater positive convexity. As I say in the video - “it is just math” - the point being that participating in the upside, while cutting off the downside, of the best and worst performing markets, is the key to geometric compounding. The specifics of what pure hedging strategies managers like ourselves actually do will vary from manager to manager. We refer to ourselves as “Value Investors in Volatility”. We own volatility across the entire spectrum of volatility products available in the market, and across any and all asset classes, where supply and demand dynamics make that volatility attractive value. Our portfolio consists of predominantly longer dated volatility products, from vanilla options to more complex variance and convexity products, all targeted for the value that they offer in terms of cost vs asymmetry in a given level of market dislocation/volatility/correlation event. We are an “always on” portfolio protection product for our investors, so that they can confidently, and cost efficiently, take more of the risk that will benefit in the upside of markets. We don’t time, or have a view on, markets. We simply play goalkeeper. The reason I don’t discuss specifics of what we do in the video, or in any public forum for that matter, is that we don’t publically market the fund, but rather only engage in marketing discussions on a reverse inquiry basis after screening the potential investor for suitability. The point of the video was to merely broadly educate that there are better ways to construct portfolios and grow compounded returns than the consensus 60/40 balanced portfolio concept.”
Great content , but that made me thinking about the overall compounding return of 2100 % over how many years ? As I want to convert that same quantity on a daily basis , Second question , given my major is in statistics , I would like to know the guest view on such compounding return statistic of 2100 % on portfolio level ? as it relates to variation over time , I mean what is the SD , skew , and Kurt of such quantity ? Do they always provide better results relative to their arithmetic mean counterparts ? Your answer is highly appreciated
Investment managers can book a free 1:1 session with Matthias Knab and get one or more of the following : - "Ask Me Anything" Session - Pitch Deck Review - Presentation Audit - Presentation Coaching - Distribution & Digital Marketing Review
calendly.com/opalesque/ With 30+ years experience in information technology and finance, Matthias Knab is one of the most followed experts and thought leaders on alternative investments.
Great interview! 44:26 Totally agree that booms and bust will last while FED remains fragile adjusting the economy like an arcade machine.
Guess what! The FED now only allows booms. Any sign of a bust and they print more money. I just don't know how long that'll last. The markets have been showing wekness so frequently, I think the FED will run out of ink for the printers (inflation, lack of confidence in dollar followed by a flight for quality and so on).
Great but not for retail investors
So there are no answers from the channel, but I'll ask here anyway: he does his magic by buying OTM puts somewhat close to expiration in huge amounts, right? David Dredge never makes it clear what he does. I wonder why... 🤔
(EDIT: that -OTM puts- and leverage on an index futures contract)
I got this answer from David Dredge for you:
"I also note the couple of older queries from Sami that you may just want to refer him to our website and the monthly Updates convex-strategies.com/blog/ and in particular the August 2019 and October 2019 Updates in terms of the examples we referenced on the compounding impacts of convexity.
“Guilherme, the point of the video was to discuss the compounding benefits of constructing portfolios with greater positive convexity. As I say in the video - “it is just math” - the point being that participating in the upside, while cutting off the downside, of the best and worst performing markets, is the key to geometric compounding. The specifics of what pure hedging strategies managers like ourselves actually do will vary from manager to manager. We refer to ourselves as “Value Investors in Volatility”. We own volatility across the entire spectrum of volatility products available in the market, and across any and all asset classes, where supply and demand dynamics make that volatility attractive value. Our portfolio consists of predominantly longer dated volatility products, from vanilla options to more complex variance and convexity products, all targeted for the value that they offer in terms of cost vs asymmetry in a given level of market dislocation/volatility/correlation event. We are an “always on” portfolio protection product for our investors, so that they can confidently, and cost efficiently, take more of the risk that will benefit in the upside of markets. We don’t time, or have a view on, markets. We simply play goalkeeper.
The reason I don’t discuss specifics of what we do in the video, or in any public forum for that matter, is that we don’t publically market the fund, but rather only engage in marketing discussions on a reverse inquiry basis after screening the potential investor for suitability. The point of the video was to merely broadly educate that there are better ways to construct portfolios and grow compounded returns than the consensus 60/40 balanced portfolio concept.”
OpalesqueTV thank you very much for kindly answering, and a big thanks to Dave also. Most of us are people with no expectations of investing in your fund simply because we don't have the means to (either because we don't have the volume, or because we don't have access to it for any other reason). Having an idea of what we can do to "bend the convexity" on our portfolios would be extremely helpful for us mortals, but I understand it's just not possible to share the mechanics so the whole internet can know about it. I will keep researching on what I can do myself to compound my portfolio in the long run, and I'm glad you guys took the time to share some information with us.
A big fund cant simply buy puts for protection, there is no liquidity. They rely on OTC deals creativity.
Closer to expiration puts lose their value very fast and dont have enough vega, makes no sense in carrying it beyond 30DTE.
Excellent question ...i can understand that David cannot leak strategy .. IMHO however , buying OTM close to DTE may not be cost efficient ...could you find any backtests or some experience with the strategy ?
@@felipefigueiralima7748 There is plenty of liquidity in SPX for a big fund to buy lots of OTM puts to help provide the tail risk protection they need in order to commit a greater proportion of their investment capital into equities.
At 44:50 he talks about a book. What book is he referring to?
Sorry another issue , how the clients of your guest being advised when it comes to gamma risk / trap while they are taking long vol positions via puts and calls ? Or this is only relevant to guys on the short side of the volatility book and at what expirations such risk become more significant? Your answer is highly appreciated
Your input
What is "gamma risk"? I know "theta risk". And since theta and gamma are two sides of the same coin, I think you're talking about it.
Sami I am posting David's reply here for you as well:
"I also note the couple of older queries from Sami that you may just want to refer him to our website and the monthly Updates convex-strategies.com/blog/ and in particular the August 2019 and October 2019 Updates in terms of the examples we referenced on the compounding impacts of convexity.
Guilherme, the point of the video was to discuss the compounding benefits of constructing portfolios with greater positive convexity. As I say in the video - “it is just math” - the point being that participating in the upside, while cutting off the downside, of the best and worst performing markets, is the key to geometric compounding. The specifics of what pure hedging strategies managers like ourselves actually do will vary from manager to manager. We refer to ourselves as “Value Investors in Volatility”. We own volatility across the entire spectrum of volatility products available in the market, and across any and all asset classes, where supply and demand dynamics make that volatility attractive value. Our portfolio consists of predominantly longer dated volatility products, from vanilla options to more complex variance and convexity products, all targeted for the value that they offer in terms of cost vs asymmetry in a given level of market dislocation/volatility/correlation event. We are an “always on” portfolio protection product for our investors, so that they can confidently, and cost efficiently, take more of the risk that will benefit in the upside of markets. We don’t time, or have a view on, markets. We simply play goalkeeper.
The reason I don’t discuss specifics of what we do in the video, or in any public forum for that matter, is that we don’t publically market the fund, but rather only engage in marketing discussions on a reverse inquiry basis after screening the potential investor for suitability. The point of the video was to merely broadly educate that there are better ways to construct portfolios and grow compounded returns than the consensus 60/40 balanced portfolio concept.”
Great content , but that made me thinking about the overall compounding return of 2100 % over how many years ? As I want to convert that same quantity on a daily basis ,
Second question , given my major is in statistics , I would like to know the guest view on such compounding return statistic of 2100 % on portfolio level ? as it relates to variation over time , I mean what is the SD , skew , and Kurt of such quantity ? Do they always provide better results relative to their arithmetic mean counterparts ?
Your answer is highly appreciated
30 years.
This fund must have crushed in the month following this interview. They bought vol when consensus was it's a waste of money.
Investment managers can book a free 1:1 session with Matthias Knab and get one or more of the following :
- "Ask Me Anything" Session
- Pitch Deck Review
- Presentation Audit
- Presentation Coaching
- Distribution & Digital Marketing Review
calendly.com/opalesque/
With 30+ years experience in information technology and finance, Matthias Knab is one of the most followed experts and thought leaders on alternative investments.