Vol Arb, Rates Vol, Dispersion, & Risk Premium. Part II with Noel Smith

We’re back for part two with Noel Smith – where we dig into the types of options and volatility strategies, he employs for his Convex AM hedge fund.  For the background on why he’s worth listening to on that front, listen to Part 1 about marketing making on the CBOE floor, Getco, and more here: https://youtu.be/XCeN56HgT68

Noel’s deep options expertise has led Convex AM to a four pillars approach to volatility trading: Vol Arb, Dispersion, Risk Premium, and Bond Vol Arb. In this episode, you will learn ideas and best practices from a lifetime of professional trading and how the Convex AM team bundles these four pillars to offer them to outside investors.

Noel also takes a deeper dive into the current macro environment we’re in and how it impacts his trading (or should we say how he lets it affect his trading), option and market maker gamma hedging, what exactly is Bond Vol Arb, how to trade it and why it is in a portfolio, and more! Plus, we couldn’t close out this two-part segment without a little fun. We ask Noel to play two truths and a lie. So, stay tuned to find out if Noel has done better in real estate or options trading, if he is actively working with Columbia University in their AI department developing their derivative model, and/or if he was the only market maker in the world on a few stocks. SEND IT.

Chapters:

00:00-01:51 = Intro

01:52-05:25 = Constructing a Volatility Trading Program & Driving Your Own Car

05:26-16:52 = The 4 Pillars of Convex AM, providing real Alpha in Vol Arb

16:53-38:28 = The importance of Dispersion & Risk Premium

38:29-49:57 = What is Bond Vol Arb? / Term Structures & the Move Index

49:58-58:12 = Macro thoughts: Flow & Liquidity

58:13-01:08:01 = Two Truths & a Lie

Follow along with Noel on Twitter @NoelConvex and for more information check out convexam.com

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