This episode of The Derivative discusses the current state of Volatility – and how to use those measurements in diversifying investment strategies with Jeremie Holdom and Colin Suvak of LongTail Alpha, an investment firm focused on tail risk hedging. The guests share insights into their work, analyzing volatility across asset classes and constructing customized hedging solutions for institutional investors.

Jeff, Jeremie, and Colin do something a little bit different in this pod – walking through several graphics and charts to discuss notable stats and trends in implied and realized volatility pricing in not just equities, but across various asset classes including energies, Gold, interest rates, and more. Check the episode out on YouTube if you're wanting to see their beautiful charts. They also explore topics like the influx of options selling and its implications. They dive into topics like interest rate movements, inflation effects, fixed income-equity correlation shifts, and how these influence positioning across strategies like tail hedging and trend following.

Learn about Longtail's customized approach to constructing hedging solutions around tail hedging costs and frameworks like generalized optionality and how the firm evaluates basis risk. This discussion also covers challenges measuring counterparty risk and the interplay between explicit and implicit hedging strategies. Sit back and look at how professionals interpret shifting market dynamics and construct diversified portfolios using alternative risk mitigation approaches. SEND IT!

Chapters:

00:00-02:24=Intro 02:25-08:40= Cal vs Can cost of living & backgrounds among the tails

08:41-18:11= Generalized optionality & Risk mitigation – Long vol, the core of basis risk

18:12-24:25= Diversifying strategies, hedging Nasdaq, customized approach, & tail risk hedging

24:26-37:24= Keeping tabs on all type of Vol – why does it matter? Basis risk across all asset classes

37:25-51:32= Implied vs realized Volatility, Volatility skew & short-term vol

51:33-01:00:44= The Vol selling influx / 0DTE

01:00:45-01:15:27= The shake out & blending all pieces together

From the episode:

Taming the tails with LongTail Alpha’s Vineer Bhansali on The Derivative

LongTail Alpha Whitepaper: Option Total Return and Active Option Portfolio Management

Follow along with LongTail Alpha on Twitter with Vineer Bhansali @longtailalpha , on ⁠LinkedIn⁠ with Jeremie Holdom & Colin Suvak & also check out there website for more information: LongTailAlpha.com

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50 Charts showing the Current State of Volatility, with Jeremie Holdom and Colin Suvak of LongTail Alpha

The Derivative