Options Alchemy: How Bernie Yu of Patronus Capital Transforms Market Making into Strategic Investing

In this episode of The Derivative, Bernie Yu, co-founder and CIO of Patronus Capital, discusses options and investing with the host. Yu shares his background, from studying actuarial science to trading options at Optiver and eventually starting his own firm. The conversation delves into Patronus Capital's market-making investment style, focusing on S&P 500 volatility, understanding market flow, and exploiting convexity. Yu explains their strategy of extending holding periods, managing risk, and identifying opportunities where supply and demand imbalances create value. He emphasizes the importance of liquidity as a driver of risk and reward, and touches on the potential impact of derivatives on the underlying market, as well as future plans for Patronus Capital, including single stock futures and options.