Market Reflexivity and Volatility Strategies

This chapter explores market reflexivity and how modern structures influence price dynamics during volatility, particularly through ETFs and passive investing. It examines the strategies investors use to profit in turbulent conditions, emphasizing the merging of quantitative and discretionary approaches. Additionally, it discusses the risks of shorting volatility and the importance of tail risk strategies to protect against market downturns.

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On today’s episode, Clay is joined by Kris Sidial to discuss tail risk hedging. A tail risk hedging strategy is designed to help investors protect their portfolios from extreme market downturns, reducing the risk of significant capital loss. By mitigating large drawdowns, investors can potentially achieve a smoother return profile over time, enhancing their Sharpe ratio and the long-term growth of their portfolio.

Kris Sidial is the co-investment officer of Ambrus Group, which implements a carry-neutral tail risk hedging strategy to protect investors against market crashes.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

01:40 - What a tail risk hedging strategy is and how it’s implemented.

06:25 - What is the VIX, and how it ties into a tail risk hedging strategy.

08:28 - Examples of historical market blowups where a tail risk strategy thrives.

21:07 - Why the reflexive nature of markets has led to more violent and swift drawdowns in recent years.

31:06 - The benefits of a tail risk strategy to investor portfolios.

50:41 - Legendary traders Kris looks up to and books that influenced him the most.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Kris’s firm: Ambrus Group.
Book mentioned: The Misbehavior of Markets.
Episode mentioned: TIP128: Edward Thorp: Investing Legend, Math Genius.
Email Shawn at shawn@theinvestorspodcast.com to attend our free events in Omaha or visit this page.
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