Increased volatility in meme stocks and growth in short-dated options trading have made the market more reflexive over time.
The proliferation of volatility products has contributed to outsize moves in the VIX and its relationship with the S&P 500.
The Ambrus Group focuses on managing tail risk through opportunistic tail strategies and medium-frequency strategies, aiming to mitigate bleed and generate alpha.
Deep dives
Chris's Background and Sports Gambling
Chris Carnut, the co-CIO of the Ambris Group, started his journey in trading and risk management as a self-professed math nerd who dabbled in sports gambling. His love for statistics led him to apply his knowledge in the financial markets.
Changes in Market Microstructure
Chris observes that the market has become more reflective over time, with increased volatility in meme stocks, growth in short-dated options trading, and changes in market microstructure. These dynamics have created an environment where the market leans heavily one way or the other, leading to sudden bursts of volatility.
The Relationship Between VIX and SPX
Chris discusses the relationship between the VIX and S&P 500 (SPX) and how the proliferation of volatility products has contributed to outsize moves in the VIX. He points out that the growth of volatility products and increased trading in short-dated options have influenced the VIX, leading to bigger swings and higher volatility.
Managing Tail Risk and Bleed Control
Chris explains how his firm, the Ambris Group, focuses on managing tail risk through a combination of opportunistic tail strategies and medium-frequency strategies. By incorporating different strategies, they aim to mitigate the bleed associated with tail risk exposure and generate alpha.
Looking Ahead: Structural Changes and the Role of the Fed
Chris discusses the potential implications of structural changes in the market, including the role of derivative exposure, retail interest in options trading, and the impact of the Federal Reserve's monetary policy on market dynamics. He remains cautious about making a definitive call for 2022 and emphasizes the importance of risk management and diversified portfolio construction.
For Kris Sidial, the Co-CIO of the Ambrus Group, trading and risk management is a passion. A self-professed math nerd in college, Kris began dabbling in sports betting using a statistical approach. He soon found his way into option markets, where is now an active participant and also a humble student continuously gathering knowledge from his interaction with the markets. Through our discussion, we learn of how Kris thinks about flows, his analysis of positioning and the complex poker game that leaves him always evaluating the why of the actions of others in the market. In his view, the market has become more reflexive over time.
Here he cites not only the volatility of Meme but also the substantial growth in products written on volatility itself and the huge growth in short-dated options trading. Kris observes changes in market microstructure over the past few years that leave the market leaning heavily one way or the other and creating very large bursts of volatility that come suddenly. It is this dynamic that he and partners at Ambrus Group are trying to capitalize on. We also spend time exploring the beta relationship between the VIX and the SPX. Here, again, Kris points to the proliferation of volatility products as playing a role in the outsized moves in the VIX that have become more common over the recent period. Lastly, we talk about managing the reality that options bleed premium. In this context, Ambrus engages in medium frequency strategies that seek to cover some of the theta bill. I hope you enjoy this episode of the Alpha Exchange, my conversation with Kris Sidial.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
