The Derivative

Latest Episodes:

Blending Insurance and Credit Expertise: How Obra Capital Finds Opportunities in Unique Situations Oct 31, 2024

Show notes

In this episode, Jeff Malec sits down with Peter Polanskyj, Head of Structured Credit at Obra Capital, to delve into the firm's unique approach to investing across the insurance and credit markets. Obra Capital is a $4 billion asset manager with a specialized focus on opportunities at the intersection of insurance and credit. Peter shares insights into the diverse opportunities in this space, which spans longevity investing, reinsurance, structured credit, asset based financing, and more. Peter & Jeff discuss how origination capabilities, structuring expertise, and risk management focus are key to creating value for investors getting into these differentiated markets. During the chat, we also cover the evolving dynamics in the insurance industry, particularly in hurricane ravaged regions like Florida, and the role these kinds of strategies can play in investor portfolios as sources of uncorrelated income and diversification. Time to reinsure your market knowledge – SEND IT!

Chapters:

00:00-02:17= Intro

02:18-16:21= A diverse credit platform: from structured products to specialized lending

16:22-33:28= Leveraging expertise across insurance – taking the stress off

33:29-49:43= Obra’s One-stop-shop and layers upon layers

49:44-01:03:50= Talking terms, specialized credit and insurance investing

01:03:51-01:11:40= The Florida insurance market & adopting to evolving market conditions

01:11:41-01:21:14= Longevity insurance & flexible capital

Follow along with on LinkedIn with Peter and Obra Capital, also make sure to check out Obra's website for more information!

Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠

Carmika Partners Unpack the August Volatility Spike and Complexities of Options Trading Oct 17, 2024

Show notes

In this episode, we explore the world of options trading with Martin Vestergaard and Michael Cameron from Carmika Partners. The conversation begins with an in-depth analysis of the volatility spike that occurred in early August, as Vestergaard and Cameron share their insights on the market dynamics and the impact on their trading strategies. The discussion then delves into the growing influence of daily options and the challenges of navigating a highly electronic and technical market. Vestergaard and Cameron provide valuable perspectives on the importance of understanding current market conditions and adapting trading approaches accordingly. Listeners will get an inside look into Carmika’s quantitative approach to options trading, with a focus on modeling implied volatility and skew across the options curve. We also discuss their industry backgrounds, where volatility trading may be heading next, and more. Whether you're an experienced options trader or looking to expand your knowledge, this episode offers a wealth of practical information and thought-provoking perspectives on the complexities in today's options landscape. SEND IT!

Chapters:

00:00-01:38 = Intro

01:39-24:15 = August 24’ Vol spike recap

24:16-38:40 = a Quantitative Approach to Options trading

38:41-50:10= Complexities in Options landscape in 2022

50:11-01:05:43= Experience & Expertise – Backgrounds & Approach

01:05:44-01:13:38= Evolving Options

01:13:39-01:28:37= Navigating Volatility & Skew

01:28:38-01:33:31= Lessons Learned

Follow along with Carmika Partners on LinkedIn with Martin Vestergaard & Michael Cameron and check out their website at carmikapartners.com for more information!

Is there Alpha in boring old Muni-Bonds, with Riverbend Capital Oct 03, 2024

Show notes

In this episode of the Derivative podcast, our host Jeff Malec sits down with Tim McGregor and Tom Hession from Riverbend Capital Advisors to dive deep into the world of municipal bonds. The discussion covers the unique inefficiencies and complexities of the $4 trillion muni bond market, which features over 75,000 different issuers across the country. Tim and Tom explain how this fragmented landscape creates opportunities for active management and value capture, even in a low-risk asset class. Throughout, we explore the importance of customized portfolio construction, credit analysis, and structure optimization to generate tax-advantaged income for individual investors. We also touch on the impact of federal policy, interest rates, and political dynamics on the muni market. With over 50 years of combined experience in municipal bonds, the Riverbend team provides valuable insights for anyone looking to understand this often-overlooked corner of the fixed income universe. Listen in, as we venture into uncharted waters with Muni bonds! SEND IT!

Chapters:

01:33-14:25= Navigating the Fragmented and Inefficient Muni Bond Market

14:26-29:15= Complexities in structure, credit & policy

29:16-36:28= Muni Bonds in a changing market: Opportunities & Challenges

36:29-52:37= Election/Fed cuts? The importance of tailoring your clients portfolio

52:38-01:01:00= Experiences with Muni Bonds, covid-sell offs and tax advantages

Follow along with Riverbend Capital on Twitter @Riverbend_Cap, Tom & Tim on LinkedIn, and check out their website Riverbendcapitaladvisors.com for more information!

Trend, Prop, and Being Allergic to Optimization with Bill Gebhardt of 10Dynamics Aug 29, 2024

Show notes

In todays episode, Jeff Malec sits down with Bill Gebhardt, the founder of 10 Dynamics, to discuss his interesting career journey and the development of his unique systematic trading approach. Bill shares his background, from working on the floor of the CBOE in the early 90s to earning a PhD in finance and transitioning into the energy trading space. He provides insights into the evolution of the commodity markets, including the rise and fall of Enron, and the challenges of maintaining an edge in fundamental trading. The conversation then delves into Bill's transition to systematic trading, sparked by his exposure to a successful systematic team at his previous firm, Trailstone. This led him to develop the 10 Dynamics model, which is built on 10 core signals that closely mirror Bill's own decision-making process as a trader.

Bill explains his "allergic to optimization" philosophy and the benefits of using multiple time frames to generate positions. He also discusses the importance of risk management, operational efficiency, and adapting to changing market conditions. Throughout the episode, Bill shares his unique perspective on the markets, the role of human behavior, and the future of systematic trading. This insightful discussion offers valuable lessons for both aspiring and experienced traders looking to navigate the complex world of alternative investments. Buckle up, because this conversation is about to "send it" into the world of alternative investments.

Chapters:

00:00-01:40= Intro

01:41-4:18= Puddle jumping to across the pond / ski adventures

4:19-14:46= Quants, Derivatives, Energies & Enron: Starting 10Dynamics

14:47-31:55= Prop trader behaviors, philosophy 101, random walk paths & systematic approaches

31:56-43:39=Time frames – why they matter, deploying risk & flat investments

43:40-53:47= Models vs traders, Quant trading, fundamental filtering & never cherry picking

53:48-01:05:09=Mispricing, Alpha decay & Delta hedging

From the episode:

Whitepaper 10Dynamics: “The Freezer” – Automated Risk control systems for systematic trading 10Dynamics.com

China Tech, Carbon, and Option Overlays in ETFs? Yep, with James Maund of KraneShares Aug 22, 2024

Show notes

Today’s episode on The Derivative, Jeff Malec sits down with James Maund, a veteran of the financial industry with experience spanning Goldman Sachs, the NYSE floor, and his current role at KraneShares. Maund provides a unique insider's perspective on the rapid growth and innovation within the ETF space while outlining KraneShares main investment pillars – China Tech, Carbon emissions/cap-and-trade, and options-based overlay strategies designed to generate income and downside protection. Maund shares his views on the challenges and opportunities facing both established ETF providers and new entrants, as well as the importance of education and alignment with investor expectations. The conversation delves into the role of market makers, the impact of regulatory changes, and the potential risks and benefits of increased options and derivatives usage in the ETF industry. Maund also offers a glimpse into KraneShares' plans for the future, highlighting areas of focus such as alternative investments and the continued growth of the carbon markets. Whether you're an ETF enthusiast or simply interested in the evolving landscape of investment products, this episode provides a comprehensive and insightful look at the dynamic world of exchange-traded funds.

Chapters:

00:00-02:02=Intro 2:03-9:15= Loyalties to the East coast, Goldman Sachs and the NY Stock exchange

9:16-20:38= KWEB – The China Tech ETF, Carbon Emissions and downside protection

20:39-34:53= The Pillars of Krane Shares: Liquid futures, writing calls and important tickers

34:54-48:34= The Evolution of the ETF, ETF options, starting an ETF and the challenges that come with it

48:35-58:02= Further developments, Unique ETFs and new ETF restrictions

From the episode:

The Derivative podcast episode with Nancy Davis Follow along with James on LinkedIn and visit KraneShares.com for more information.

Unpacking the Sell-Off! Awesome Insights from discretionary macro trader Asim Ghaffar Aug 08, 2024

Show notes

Today's episode features an in-depth discussion with discretionary global macro trader Asim Ghaffar, founder and CIO of AG Capital. Ghaffar shares his insights on the recent market volatility, including his views on the potential triggers behind the sell-off and the chances we have for a recession. Was it just a blip on the radar, algos deleveraging? He explains his discretionary macro trading approach, highlighting the importance of risk management, position sizing, and the psychological challenges of the business. Ghaffar also discusses the differences between his strategy and systematic trend following, as well as the unique opportunities smaller managers can pursue compared to large global macro funds. In this chat we also explore Ghaffar's personal journey into the industry, the challenges of starting a hedge fund, and his long-term outlook on markets, including his perspective on the role of gold in a portfolio.

Chapters:

00:00-02:01=Intro

02:02-11:14= What triggered the Sell-off? The Yen Carry trade? Or just algos gone wild…

11:15-22:35= The secret sauce to a long-term approach, algo moves and the mental games of trading

22:36-31:55= Discretionary vs Global Macro & the unsolvable puzzle or crack under the pressure

31:56-43:00= Psychology & Philosophy? The real head games of trading & sparks to start a hedge fund

43:01-49:50= The potential of a recession, who wants it? Fed rate cuts, the wealth effect, & investment vs trend

49:51-01:06:19= What’s beyond the horizon, staying out of the noise and focus on the fed

01:06:20-01:14:22= Commodity prices for discretionary trading & what’s with gold? Getting perspective…

From the episode:

Derivative episode: Wisdom from the wizard maker with Jack Schwager

Follow along with Asim on LinkedIn and AG Capital's LinkedIn. For more information on AG Capital visit agcapital.fund

Hedge Fund Quants Unlock the Power of Dispersion: Versor's Unique Cross-Sectional Relative Value Approach Jul 25, 2024

Show notes

In this episode of The Derivative, host Jeff Malec sits down with DeWayne Louis and Nishant Gurnani from Versor Investments, a quantitative investment firm celebrating its 10th anniversary. The discussion delves into the personal backgrounds and journeys that led to Versor’s founding, from their work providing efficient exposure to traditional hedge fund strategies through risk premia type approaches to new methods such as their unique GETT program which goes long/short more thana dozen global stock index futures markets.

The conversation explores the evolving skill sets required in the hedge fund industry, including the importance of math, quantitative finance, and AI/machine learning expertise.

Versor's investment strategies are examined, focusing on their use of alternative data sets and innovative approaches to alpha generation, such as their cross-sectional relative value strategy which looks to capture dispersion in global equity markets through more than 30 alpha forecast models across short, medium, and long term time frames.

Join us for this comprehensive look into the quantitative investment strategies and innovative thinking that have helped Versor navigate the competitive hedge fund landscape over the past decade.

Chapters:

00:00-01:38=Intro

01:39-12:22= Summer in the City and starting a Quant firm 12:23-25:10= 3 broad strategies, cross-sectional portfolios & positive convexity 25:11-42:57= GETTing into the strategy, dispersion across markets & capturing market dislocations 42:58-54:26= Alternative data sets & natural language processing 54:27-01:01:38= Using A.I., generative models & compliance constraints

01:01:39-01:10:51= Long short equity, use of data & the next 10 years

From the episode: Has Trend Gone Flat? Return Convexity in Trend Following (whitepaper)

Versor10: A Decade of quantitative research in 10 whitepapers

Bastian Bolesta on The Derivative episode

Salemn Abraham on The Derivative episode

Follow along with Versor on Twitter @VersorInvest, look them up on LinkedIn - DeWayne | Nishant and check out their website versorinvest.com for more information

Volatility Vultures: Hunting for Options Talent with Gary Selz of Zero Delta Jun 27, 2024

Show notes

In this episode of the Derivative we chat with Gary Selz, co-founder of Zero Delta Funds. Gary shares his background growing up in Chicago and studying electrical engineering at Northwestern University. He discovered options trading through a financial engineering course and was introduced to a Chicago prop trading firm. Gary discusses his experience training as a new trader at the prop firm. He explains how traders are given time and support to learn before getting their own book to trade. Gary reflects on the diverse career paths that can lead traders to prop shops, from poker players to accountants. The conversation covers Gary's transition from trading to investing his own money in volatility strategies. This led him to co-found Zero Delta Funds and launch a fund seeking talented volatility traders from across the globe and not always where you’d expect. Gary highlights their process of finding under-the-radar traders internationally and evaluating their sophistication. Gary and Jeff discuss various aspects of options trading, including the evolution of the market landscape. They analyze single stock versus index volatility trading. Gary shares insights on the current opportunity set and speculates on potential future market catalysts. Come join us as we dig deeper into option and vol trading and into the mindset of successful volatility traders.

Chapters:

00:00-01:34=Intro

01:35-15:45=Electrical engineering to prop trading, nature vs nurture & trading floor antics

15:46-25:08= Balancing talent with technology in prop firms – traders finding their edge

25:09-31:42= Launching Zero Delta, investing in volatility with no strategy drift

31:43-45:19= Option vs Vol traders, Getting an edge, seeking out specialty traders

45:20-57:01= Single name vol, what’s Zero delta? And positioning your portfolio for the unknown

Follow along with Gary on Twitter @SelzGary, check him out on LinkedIn and make sure to visit zerodeltafunds.com for more information.

Carry On: Demystifying the Carry Trade with Rodrigo Gordillo & Adam Butler of ReSolve Jun 26, 2024

Show notes

We’re back! Today’s podcast features The Derivative show stoppers Rodrigo Gordillo and Adam Butler of Resolve Asset Management discussing the carry trade and its applications in investment strategies. They begin by explaining what the carry trade is and discussing common misconceptions around it. They then dive into different types of carry that can be found in various asset classes like bonds, commodities, currencies, and equities. The guests discuss how carry strategies can be implemented, either on their own or as part of a larger multi-strategy portfolio. They also compare carry to trend following strategies and debate the pros and cons of each approach. The podcast explores how a diversified carry factor can provide returns with reduced risk when combined with other strategies. Rodrigo and Adam explain how carry fits into their risk parity framework and can be used to tilt allocations. They also discuss integrating carry and trend signals to lower trading costs. Gear up to receive that spoonful of sugar that indeed will make the medicine go down with tons of insight and access to some great content as an investment factor and perspectives on its role in multi-asset portfolios.

Chapters:

00:00-01:31= Intro

01:32-10:31= What’s a carry trade?

10:32-20:34= Types of carry in different asset classes & Implementing strategies

20:35-33:11= Carry vs Trend & portfolio applications of carry

33:12-49:05= Combining carry & trend: How does it fit together?

49:06-01:04:54= Why Carry? The future of carry strategies

From the episode:

The Rise of Carry(Book)

The Carry Trade post

Get Stacked Podcast

ReSolve Riffs Podcast

Setting the Risk Parity Record Straight - The Derivative episode

Researching the Risks of return stacking with Corey Hoffstein & Rodrigo Gordillo - The Derivative episode

Asset Allocation, AI, and the Alpha process with Resolve - The Derivative episode

Follow along with ReSolve Asset Management on Twitter/X @InvestReSolve Adam Butler @GestaltU & Rodrigo Gordillo @RodGordilloP, LinkedIn and check out their research page for more information

Surviving Adversity, Building Resilience, and Evolving a Quantitative Investment Firm with Joe Kelly of Campbell May 02, 2024

Show notes

Joe Kelly, partner at Campbell & Co., joins us this week for a new episode of The Derivative. Jeff starts talking skiing, as he’s apt to do, but this time is a bit different, with Joe sharing an update on his recent recovery from a nasty ski accident that nearly left him paralyzed (or worse). We then move right into Joe discussing his career journey from trader to founding a FinTech startup during the tech bubble, to joining the long-time managed futures standout Campbell & Company.

Joe touches on the firm's focus on collaboration and shared research culture differing from the classic ‘pod shop’ model. Kelly and Malec discuss Campbell's investment strategies, including trend following, quantitative macro, long/short equity, and short-term trading. They also debate systematic macro strategies versus global macro versus trend following; while touching on risk management, portfolio construction, and the challenges of managing non-correlated investments. Kelly provides insights into Campbell's future plans, including enhancing short-term capabilities with AI and considering new asset classes. This episode has it all! A little alternative investment history tour, a peek inside one of the most successful Alts firms of all time, and bringing it back full circle, overcoming adversity through resilience. SEND IT!

Chapters: 00:00-01:50=Intro

01:51-13:04= Skiing gone wrong and finding resilience to defy the odds

13:05-22:10= Early trading days: FinTech, Hedging stock options, Rotella Capital, and industry revolution

22:11-35:57= A Campbell opportunity, firm culture & collaboration in investment management

35:58-48:03= A 4 Bucket approach, stable vol, convexity locked in, & transparency for portfolios

48:04-58:29= Quant Macro vs Trend – Momentum signals and relative value strategies / Replication: Impossible?

58:30-01:06:19= What’s next? Date density and Short-term opportunities - Wait, what about A.I.?

From the episode:

MMI Index Article (Blast from the past: How futures saved stocks)

Panel Event Podcast with Joe Kelly (Why Systematic, Why CTA? Why Now?)

Andrew Beer on The Derivative episode (Fund replication)

Check out our Trend Following Guide!

Follow along with Joe on LinkedIn and for more information visit Campbell's website at https://www.campbell.com/⁠

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