With the VIX at a 3-year low, Kris Sidial, tail risk manager & co-chief investment officer of The Ambrus Group, returns to Forward Guidance to tell Jack about what it’s like hedging tail risk during a volatility bear market (bull market in risk, bear market in vol).

Sidial sheds light on the spectacular rise of Zero Day To Expiration (0DTE) Options and explains why he thinks their proliferation poses a serious risk to market structure. That being said, Sidial thinks implied volatility could continue to decline for a while. Filmed on June 23, 2023.

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Ambrus’ paper on Zero Day To Expiration (0DTE) Options:

https://static1.squarespace.com/static/5f6299603ceb25330f902e7d/t/644beff4e8d2ee6519d85da2/1682698232481/Ambrus+Capital+-+Dispelling+False+Narratives+About+0DTE+Options.pdf

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Timecodes:

(00:16) Market Volatility Is At A Three-Year Low

(07:34) Implied Volatility Could Go Even Lower

(15:14) Tail Risk Strategies

(36:01) The Stunning Rise Of Zero Days To Expiration (0DTE) Options

(41:29) Huge Amounts Of Unregulated Leverage In 0DTE Options

(52:31) Market Crash Is "Inevitable" Because Of Zero Day To Expiration Options

(01:04:14) Banks' Hedging Of Interest Rate Risk

(01:07:52) Performance Reporting of Tail Fund Risk Funds

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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.