Alpha Exchange

Dean Curnutt
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Alpha Exchange

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.

  1. 2 DAYS AGO

    Rocky Fishman, Founder and CEO, Asym 500 LLC

    It was a pleasure to welcome Rocky Fishman, Founder and CEO of derivatives advisory firm Asym 500 back to the Alpha Exchange. An area of specialty for Rocky is evaluating systematic trading strategies, like vol targeting, that live and breathe within equity markets and potentially sponsor feedback loops. The focus of our discussion, the growing universe of leveraged ETFs, a unique product set that has been on my mind and that Rocky has recently done a deep dive on. We start our conversation by revisiting the August 5th VIX event that saw the S&P options market turn highly illiquid as the prices quoted for deep out of the money puts reached unheard of levels. For Rocky, while the event came and went, there are lessons, namely that the tails can exert themselves suddenly. With respect to leveraged ETFs, Rocky sizes the US universe as $135bln in assets under management for leveraged and inverse products, $120bln of which is in equity products. He walks through how both the leveraged long and inverse products on the same underlying, non-intuitively, are responsible for buying or selling in the same direction on the same day. These amplifying effects, unlike efforts to map the market’s gamma profile are unambiguous. As such, they are worth keeping a close eye on, especially as the ETF issuer’s daily required rebalancing efforts take place near the close of trading. Here, Rocky does observe both more vol and volume in the market near the end of the day. I hope you enjoy this episode of the Alpha Exchange, my conversation with Rocky Fishman.

    46 min

  2. 2 DAYS AGO

    20 Things to Do Before You Ask for a Price (Part 3)

    Welcome to Part 3 of “20 Things to do Before You Ask for a Price”. To review, “20 Things” is a to-do list I developed more than 2 decades ago while running a derivative sales team. The desk committed a substantial amount of capital in pursuit of business, which made it easy to win trades but also easy to lose money in the process of winning those trades. 20 Things was about playing defense and offense simultaneously by requiring the salesperson to be an active part of the price discovery process. While the trader would ultimately make the price and bear the risk, the salesperson, through 20 Things, could be a valuable part of the process. The result: better risk taking and a more sustainable business. Here are things 11-15. I hope you enjoy and find this useful. I wish you an excellent Thanksgiving holiday. 11. Corporate action? Is this stock a deal name or subject to some other corporate action? Use the CACS function on Bloomberg to look for corporate actions. Deal names can have very unique implied distributions and are difficult to provide risk capital into in option trades. 12. Evaluate the vol. What is the implied volatility of the name? How does it compare to realized volatility? How does the name spread versus index or sub-index volatility? Run the GV function. 13. What does strike skew look like? The skew may be indicative of the amount of gap risk potential in the name. Run Bloomberg command OVDV SKEW and look at the spread in risk reversals on the OMON screen. 14. What is the shape of the term structure? This can give a sense as to how much the market is willing to pay for an event (ie, earnings or an FDA announcement). Run Bloomberg command OVDV TRMS. 15. What is the vol risk in the trade? Is this a long-dated option on a high-priced stock? If so, you should know what the vega of the option is. Example: 10k F Jan’25 11 strike calls have far less vega than 10k MSFT Jan’27 430 call. These very different options call for different kinds of dialogue with the trader and client. Use the Bloomberg OV function.

    17 min

  3. 6 DAYS AGO

    Dominique Toublan, Head of US Credit Strategy, Barclays

    While the SPX has enjoyed a banner year in 2024, a series of risk events have mattered, including the August 5th spike in the VIX and option pricing uncertainty into the US election. Credit spreads have generally behaved in benign fashion, however. What will 2025 bring for the world of credit and what risks should we pay attention to? With this in mind, it was a pleasure to welcome Dominique Toublan to the Alpha Exchange. Now the Head of Credit Strategy at Barclays, Dom landed on a credit derivatives desk in 2007. With a deep background in physics, Dom quickly saw that while derivative products may utilize some of the complex equations that underpin the physical sciences, markets are prone to episodes of disorder with unpredictable outcomes. Our conversation first considers the behavior of macro credit products in the period before and after US Election. Here, Dom shares that the same vol premium observed in equity options was visible in both credit spreads and credit implied vol as well. In the aftermath of the Election, Dom sees strong, ongoing demand for US spread product with a global buyer base looking less at whether spreads are wide or tight but for all-in yield, pointing to Taiwan life insurance companies for example. In evaluating the risk premium of credit spreads, Dom argues that while valuations are a bit tight, ongoing inflows should continue to support the market. Acknowledging there are some macro headwinds, he doesn’t see them as strong enough to be disruptive. Lastly, we talk about the progress made in gaining credit exposure through a systematic, factor-based approach. Dom sees this as an exciting time of product development, calling it the equitification of credit. With considerably more data now available and with the advent of credit ETFs, the market has embraced portfolio trading, greatly facilitating risk transfer. Along with this, the credit market is incorporating the principles of factor exposure, long a part of the equity market. I hope you enjoy this episode of the Alpha Exchange, my conversation with Dominique Toublan.

    50 min

  4. NOV 19

    20 Things to Do Before You Ask for a Price (Part 2)

    We are back, with installment number 2 of “20 Things to Do Before You Ask for a Price”. It’s a to-do list for the equity derivatives salestrader who chooses to be a relevant and constructive part of the option risk transfer process that a buy-side client and sell-side trader engage in. Small trades – like buying a pack of gum – can be consummated quickly. Large trades – like buying a house – typically take a while. But large trades that are borne in a moment’s notice – that’s a unique thing with unique risks. Things 6 through 10 are about quarterbacking trades to completion in the context of being short information asymmetry. I hope you enjoy and find this useful. 6. Is the order outright or delta neutral?  This dictates speed of response needed to the client. There’s more time on delta neutral orders. 7. Check option market depth. Evaluate the screen market using OMON function.  How wide are the screen markets?  Is the option better bid or offered?  8. Check volume. Use the OMST function to see option volume in the name and that line today.  Check open interest in that line to see if the trade is opening or closing. 9. What is the option delta?  What is the share delta?  What is share delta as % stock volume?  Note that low delta options can be challenging to sell from a risk standpoint and that high delta options can be difficult from a stock liquidity standpoint. 10. Check earnings. When does the stock report?  Does this option order comprise a report date or other important release of company information?  Run the ERN function to look at historical impact of earnings announcements.

    17 min

  5. NOV 15

    20 Things to Do Before You Ask for a Price (Part 1)

    I wanted to welcome you all to a new, 4-part series of the Alpha Exchange, “Twenty Things to Do Before You Ask for a Price”.  In short, this is my thinking on what a derivatives salesperson ought to do instinctively and nearly instantaneously in his or her interaction with a trader colleague being asked to price option risk for a client. These 20 things constitute a real time to do list for the salesperson that adds alpha to the process of price discovery and can allow the trader to take more risk by mitigating certain kinds of risks.  In this short podcast, I share the first 5.  I hope you enjoy and find this useful. 1. Know the client.  Who is the client, what is desk relationship and what are the client’s expectations? This starting point is a critical component of quarterbacking the price discovery and execution process. Every client is unique. 2. Know the risk environment.  Is vol better to buy or are clients dumping options? What is the backdrop for the commitment of capital around the street? This is critical to managing expectations. 3. What motivates the specific trade?  Is the client likely buying or selling vol?  Is he/she opening, closing or rolling? 4. What is the stock?  How well does the stock trade?  Is there news out in the stock? 5. Buy yourself time.  If it is an off-the-run name with a ticker you have never heard of, let the client subtly know you have never heard of it (nor should you have).  This provides a bit more time for the trader.

    13 min

  6. NOV 12

    Post Election Reflection (on Vol)

    A resounding Trump win. A collapse in vol. Bitcoin “number go up”. And up. And up. The French Whale on Polymarket got paid. A star was born in Scott Jennings. The Fed eased. And, Powell, in the words of DiCaprio in Wolf of Wall Street said, “I ain’t f’n leaving”.  That’s the summary. But there’s lots more to explore and in this short pod I aim to provide you with some food for thought on the risk front. Markets have been well behaved and the VIX spiraled lower as most expected it would on November 6th. Still, there are plenty of risks on the horizon and we ought to recognize what volatility is all about. It’s how the market processes change. And it’s pretty difficult to argue that we have not just experienced profound change in the leadership and governing philosophy of the United States. Taxes and tariffs, regulation and immigration, foreign policy and Fed policy. I finish the discussion with a recommendation to stay quite long, but also spend a little premium on a put spread overlay. It feels like a small price to pay for sleep at night insurance. I hope you find this interesting and useful.  Be well.

    16 min

  7. NOV 5

    Shailesh Gupta, Head of Structural Alpha, Simplify Asset Management

    Of all the concepts focused on throughout the discussions hosted on the Alpha Exchange, the notion of “carry” is one of my favorites. In its most basic definition, carry measures the income or cost to holding an asset in the steady state, when nothing changes. Underpinning the assessment of value in any option trade or strategy is a view on the favorability of carry at a given point in time. Can I own options for free or at least at meaningful discounts to their value? Mr. Market makes this very unlikely. Can I be especially well compensated for being short optionality? These are challenging questions, worthy of careful study. And in this context, it was a pleasure to welcome Shailesh Gupta, the Head of Structural Alpha at Simplify Asset Management to the podcast. Our conversation explores areas of carry in the market, why they exist, how they can be harvested and what can go wrong in the process. Shailesh shares his views on the pricing of interest rate volatility, where the vol risk premium has been especially high and how that fits into product design at his firm’s ETF platform. We talk also about risk – including the crowding episode in VIX products in 2017 leading into the XIV event of 2018. I hope you enjoy this episode of the Alpha Exchange, my conversation with Shailesh Gupta.

    50 min

  8. NOV 1

    Meb Faber, Founder and CEO, Cambria Investment Management

    It was a pleasure to host a discussion with Meb Faber, the Founder and CEO of Cambria Asset Management. Our conversation begins with the question of whether it’s a good idea to buy the market at an all time high. To this, Meb argues it’s actually a great idea, pointing to the data and that markets in an uptrend continue to move higher. We incorporate the notion of a trend following strategy, which Meb illustrates can be helpful in managing the inevitable and substantial drawdown which forces many investors out of the market and destroys the value of compounding in the process. No strategy is perfect, and trend following can underperform during sideways, choppy markets. But it has proven important to cut off the deep left tail with reasonable success. We also explore the work Meb has done on shareholder yield, a strategy that he’s passionate about and argues works particularly well in foreign and emerging markets. Lastly, we talk about that a vastly under-appreciated aspect of return generation in investing: taxes. The team at Cambria is doing some interesting work on this front, utilizing a feature of the code that helps investors diversify risk in a tax efficient manner. I hope you enjoy this episode of the Alpha Exchange, my conversation with Meb Faber.

    57 min
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About

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.

Information

  • Creator
    Dean Curnutt
  • Years Active
    2018 - 2024
  • Episodes
    193
  • Rating
    Clean
  • Show Website
    Alpha Exchange

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